On November 1st, American University’s YAL chapter hosted libertarian economist Bob Murphy for a discussion about the Federal Reserve. About forty students attended.
Murphy displayed evidence explaining that the Federal Reserve creates the boom and bust “business cycle” in our economy. He used the example of the 2008 financial crisis to demonstrate how artificial demand created by government, along with credit expansion from the Fed, resulted in misallocated resources. Murphy described the boom cycle: “It’s like building houses with limited resources and no blueprint. You keep building houses without knowing how many bricks you need and how many houses you can sell.”
Murphy left the crowd with an ominous warning. He described the general theory of Austrian economics, and how it relates to today. “How can you tell when there’s a bubble? This is the question people usually ask me. Well, let’s line up today with 2006.” Murphy noted that just as the Fed did in the last two years before the 2008 crisis, it is incrementally increasing interest rates today. “But if you think the last recession is bad, look at the credit expansion since then.” Murphy displayed a graph showing that credit expansion since 2009 is about twenty times larger than the expansion between 2002 and 2008. He claimed, “We may see the next crisis soon at a much graver cost.”
Murphy answered about ten questions from the crowd. Additionally, a Deputy Chief of Staff from Congressman Thomas Massie’s office attended Murphy’s speech and spoke to the AU YAL e-board.Published in