Friday, January 15, 2016

Hoping for an Intellectual Recovery

Gold Money published an article two days ago about two important papers that I hope will bring reform in central banking and the monetary system of the world. I am referring to the papers that just recently came out from the Bank for International Settlements (BIS) and from the Britain's Adam Smith Institute. These papers confirm the message of the Austrian Business Cycle Theory. I wish that this is just a beginning of intellectual recovery that Murray Rothbard told us in his essay, Economic Depressions: Their Cause and Cure:
“Once again, the money supply and bank credit are being grudgingly acknowledged to play a leading role in the cycle. The time is ripe for a rediscovery; a renaissance of the Mises theory of the business cycle. It can come none too soon; if it ever does, the whole concept of a Council of Economic Advisors would be swept away; and we would see a massive retreat of government from the economic sphere. But for all this to happen, the world of economics and the public at large, must be made aware of the existence of an explanation of the business cycle that has lain neglected on the shelf for all too many tragic years” (“The Austrian Theory of Trade Cycle and Other Essays”, 1978, p. 91).
Let me just share three important paragraphs from Gold Money:

"Within one month of the Fed raising the Fed Funds rate by a miniscule 0.25%, it seems the whole world is falling apart. The usual market cheerleaders are now on record of expecting a global crisis to develop, the signs being too obvious to ignore. Markets are over-valued relative to deteriorating economic prospects. Collapsed energy and commodity prices tell their own story. Shipping rates and the share prices of US utilities (including rails and freight) are falling. The days of blaming China for a contraction of world trade are over: the downturn is now far larger and more widespread."

". . . the banking crisis of 2008 was a prelude, rather than the crisis itself. The Fed will almost certainly reduce interest rates back to zero, and reluctantly will have to consider imposing negative rates."

"The Keynesians will blame the Fed for a complete policy failure. They will argue in retrospect, as they did following the banking crisis, that the financial and economic crisis of 2016 was made immeasurably worse by the Fed raising the Fed funds rate and not pumping yet more money into the economy at such a crucial time. It's like saying alcoholics must drink more to be cured."