Blankenhorn implores his readers to “Ignore The Doomsday Chorus” and observes:
What most of today’s Doomsday Chorus has in common is a devotion to libertarianism and to Austrian Economics, which holds that there are absolute rules about economic behavior that can be deduced logically, and that government is powerless against these rules.
Robert Murphy, a scholar associated with the Mises Institute, whose slogan is “Advancing Austrian economics, liberty and peace,” explained the difference between Austrians and monetarists such as outgoing Federal Reserve Board chairman Ben Bernanke in a 2011 essay for the Institute.
Milton Friedman, the “Chicago School” economist and monetarist, blamed the Great Depression on tight money, Murphy wrote, and Bernanke’s policies aimed to push up the money supply to compensate. “These views are anathema to modern Austrians,” who “think the central bank should be abolished.”
What’s worse, the Austrians are now even somewhat influential, which is an especially big bummer:
Thus, if you liked Ron Paul or think the Mises Institute makes economic sense, the current economy looks like a bubble that is bound to pop. With a whole school of economics riding on the outcome, seldom has the Doomsday Chorus featured such a distinguished company as it does today.
The best known among today’s Cassandras may be David Stockman, who headed the Office ofManagement and Budget under President Reagan, and has written a best-selling book, The Great Deformation: The Corruption of Capitalism in America, summarizing the Austrian case against both monetarism and the fiscal theories of John Maynard Keynes.
“Friedman’s error about the Great Depression led him, albeit inadvertently, into the deep waters of statism,” Stockman told the Mises Institute last year. “He claimed to be the tribune of freemarkets, but in urging [Richard Nixon] to scrap the Bretton Woods gold standard he inaugurated the present era of fiat central banking.”
Blankenhorn goes on to note that Peter Schiff, Jim Rogers, Marc Faber, and others have gone over to the Austrians (to varying degrees).
Blankenhorn seems to be under the impression that the naysayers are just perma-bears who might be proven right on occasion if they’re lucky. Austrians aren’t perma-bears, however. We’re bearish at the moment (not necessarily in regards to the short term) because of the way the economy is currently structured. We’re not bearish because we hate to see people having a good time or because “what goes up must come down,” or due to some moralistic theory that some people seem to believe we subscribe to. The fact of the matter is that spending is high, savings are low, debt is enormous, prices are going up quickly for regular people, and little real wealth is being created in spite of claims t hat the economy is doing wonderfully. That doesn’t speak to good times beyond the short term. Feel free to buy lots of stocks as the folks at The Street want you to. Just be sure to sell before the Fed runs out of new tricks to try.