Tuesday, August 23, 2016

My Exchange With an Austrian-Lite

The following exchange took place between me and Black Noir in the comments section of the post, BOOM, BOOM: Austrian-Lites Nuked:

I understand your perspective. I'm still of the opinion you are ignoring the forest for the trees. In a few short months, the narrow measurements of your boom will be gone.
  1. Based on what? You have no analytic framework. Why a few short months? What is your theory and how does it fit in with Austrian business cycle theory?

  2. Based on present trends of just about every other economic measurement. I could very well be wrong and the economy could lift off again and invalidate the trajectory. The stock market has been manipulated for some time and does not reflect the underlying economy. Corporate earnings have been trending down for quite a while. Labor stats are a lagging indicator and are also manipulated to a significant degree. Mine is a forest for the trees argument. Business inventory to sales high, federal tax receipts slowing, factory orders declining, retail sales sluggish, multiple regional fed surveys poor, and on and on.

  3. With all due respect, you don't know what the hell you are talking about. The business cycle is about a boom and bust in the capital goods sector and a readjustment in employment. Stocks and real estate are soaring that's the capital goods sector. Unemployment has collapsed.

    Charges of "manipulation" are the last refuge of a bad theorist.

    Or are you somehow really buying housing at collapsed 2009 prices?


  1. What I think Robert is ignoring, or at least not addressing to the public at large, is the extraordinarily easy monetary policy that persists at the Fed in the face of these booming asset prices and low unemployment numbers. The last time the capital goods sector looked like this, in 2007, the Fed funds rate was at 5.25%. Now it's under 0.5%. This is not your fathers' or your grandfathers' business cycle folks.

  2. @Neil - the absolute interest rate is mostly irrelevant - the interest rate only matters in context of what it is relative to what the natural interest rate would be if there were no central bank ... what matters far more is the rate of increase in money supply (which Mr. Wenzel does not at all ignore) ... looking at the Fed-set interest rate in a vacuum is mostly useless

  3. @Danger Pioneer - What would the natural interest rate be if there were no central bank? When companies borrow money to buy back stock or hedge funds borrow to fund leveraged bets , do you really think they care about the "rate of increase in money supply"? Do you really think 5.25% vs. 0.05% rates is a meaningless comparison?