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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: mishedlo who wrote (89589)11/2/2008 10:39:17 PM
From: studdog1 Recommendation  Read Replies (1) of 116555
 
I have read quite a bit about the Austrian economic school. I think I can sum up my understanding of their approach to economic downturns by paraphrasing Voltaire. Referring to physicians, he said "The role of the doctor is to sufficiently amuse the patient while nature effects a cure". The Austrian school feels the role of the government/central bank is to sufficiently amuse the population while creative destruction cures the economy. While the Austrians are probably right, we are not going to get this approach no matter who is elected.
So, Mish, you have been so right about deflation, and have been so articulate about why the current Paulson/Bernanke approach is wrong. Using the Austrian School as a guide certainly accurately predicted our current mess. I don't find though, much evidence that their prescription of nonintervention has ever really been applied, and the chances of it being applied now are slim to none. We do not have the stomach for it. So given that circumstance, what else might work? It appears that massive deficit spending worked for the Japanese early in the Great Depression. I think it can be argued that it worked for us when we got around to deficit spending 23% of GDP in WWII.
Our current leaders, other than Ron Paul, are not going to embrace the Austrian School. It is not going to happen. So what else might we do? Is there any other way out? Or, will anything we do, like FDR, just prolong the agony? Now that your predictions have come to pass and we appear to be on the edge of an economic abyss the answer to those questions are all that matter now.

Karl
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