Wednesday, February 3, 2010

Ed Yardeni: "We Are All Austrians Now"

Former Columbia University's Graduate School of Business professor, who was an economist with the Federal Reserve Bank of New York, and has held positions at the Federal Reserve Board of Governors and the U.S. Treasury Department, Ed Yardeni, writes:
We are all Austrians now. Over the past few weeks, in Los Angeles, San Francisco, Sacramento, New York City, and London, I’ve run into more and more institutional investors whose economic and financial views either knowingly or unknowingly reflect the influence of the Austrian School of Economics. I am in Zurich today and Geneva tomorrow. … How do you know if you are an Austrian? Here is a simple test. Answer yes or no to the following question: “I believe that this will all end very badly.” If you agree, then you are probably worried that all the government policies that rescued us from a depression in 2008 and 2009 only postponed the coming wipe-out of debt and the collapse of asset prices–and will actually make the inevitable calamity even worse.
Curiously, Yardeni's comment on what Austrian economics is, and the role of globalization, indicates he may require further thinking about the subject. He continues:
I share these concerns, but I believe that Globalization will save us from such an awful fate. The end of the Cold War marked the end of the greatest trade barrier of all times. The resulting proliferation of free trade liberated billions of people around the world from their lives of quiet desperation. Standards of living are rising rapidly, especially in emerging economies, as prosperity displaces subsistence. Previously immiserated people are less miserable. They are earning enough so that they can both save and have more discretionary income to improve their material well-being. In other words, Globalization is stimulating more growth in incomes, saving, and consumption. Such growth is the best antidote for the grim Austrian prescription of debt deflation.
It is simply unclear how Yardeni expects the distorted capital structure of central bank money printing to be corrected in any other way than what Yardeni calls "debt deflation."

Globalization, in other words, won't do much to help, for example, those who are now suffering in houses that are way under water and where scheduled mortgage payment increases may be ahead.

(Via The Ethiopian Review)


  1. The fact he has little confidence in current policy is good, but unless the guy is calling for competitive currencies, I can't consider him an austrian.

  2. Most of the austrian economists seem to be in the inflation camp these days. Also this guy needs to learn the difference between globalization and capital accumulation. We already have a global economy, we just need to prevent the government from creating capital consumption.

  3. I recall Yardeni from my broker days at Prudential-Bache in the mid 1980's. He spent most of his time being clueless then. Not much has changed. With all of his experience at the FED, he is perverted beyond rescue. He would never make a pimple on an Austrian economist's butt.