The Business Cycle, RIP?

Robert Samuelson at WaPo writes:

The business cycle, RIP?...

The Great Recession has inflicted enduring economic damage. Business investment has lagged; many workers have dropped out of the labor force. By early 2014, calculates the BIS, U.S. gross domestic product — the economy’s output — was 13 percent below where it would have been if pre-crisis growth trends had continued. In Britain, the gap was 19 percent; in France, 12 percent; even Germany had a shortfall, 3 percent. 

Conventional business-cycle analysis didn’t anticipate these steep losses. It also missed other features of the post-crisis economy. Unlike earlier recessions, countercyclical policies — especially low interest rates by the Fed and other government central banks — have only modestly helped recovery. Low rates fail if borrowers don’t want to borrow or lenders don’t want to lend...  The many failures of economics before, during and after the financial crisis have left an intellectual vacuum. There’s a scramble for policy ideas.

There is nothing about the Great Recession that could not be explained by Austrian School business cycle theory.

I just sent a copy of The Fed Flunks, which includes a chapter detailing my real time warnings about the developing financial crisis of 2008, and also a copy of Austrian School Business Cycle Theory by Murray Rothbard, which explains the theory I used to forecast the 2008 financial crisis. In the book, Rothbard also discusses the strengths of Austrian theory versus other business cycle theories, and discusses the problems with government actions that attempt to resolve a business cycle crisis.

No one who fully understands Austrian business cycle theory could observe the current Fed money printing activities, and its impact on the economy, and declare the business cycle or correct business cycle theory dead.

-RW