I’m not a Keynesian or Austrian and am honestly convinced that both views are valid given different economic circumstances. However, the Austrian notion that government intervention is evil seems to me quite extreme… I definitely see how the government can aggravate rather than dampen economic cycles however it seems that the government can under certain situations also help the economy… I am still learning about both theories as much as I can with an open mind but from what I’ve observed, ever since the gold standard was abolished in 72 and the FED was established, there have been no depressions since the Great Depression… only cyclical recessions…
Is it not possible that the FED has succeeded in its duty of preventing the outbreak of another depression?
It would take all the content on this web site to give you the answers you are looking for. I would start by reading the dailies and get some books if you want the full story. I don’t mean to sound dismissive but giving you a fair and complete answer on a forum in just a short response is difficult.
A book I reccommend is Henry Hazlitt’s “Econimics in One Lesson” which gives you a precise yet short and simple account of how the government negatively disrupts the economy.
Also visit the dailies section: http://mises.org/daily/ and browse around and read a few articles that catch your interest. There is plenty about the Fed and how it has damaged the economy. Since the great depression the Fed has continued to wreak havoc in the economy. It has funded wars, caused bubbles, debased the currency hurting the lower/middle classes etc. There is plenty of content on here to support this as well. Please take the take and have a look around, I hope you will find the answers you are looking for
When you say that " both views are valid given different economic circumstances", you are really saying that there is no underlying principles and fundamentals of logic in economics. It’s like saying that we have different physics when underwater our in outer space.
The FED was established around 1913, about 15 years later the shit hits the fan, coincidence?
By the way, how do you classify the current economical situation of the USA? How efficient you believe that QE and QE2 were?
I have a related question since mostly the main focus on this topic is on the US. After the FED took control, there was the great depression that remained from 1929 until the beginning/end of WW2 (either way the war years cannot be counted as business as usual).
But after WW2 there is something that makes the US economy unprecedented in the whole history in the whole world. Bretton Woods determined a local currency the US Dollar artificially as the world’s reserve currency. For my point of view this makes the US special, and you cannot compare the years after 1944 with the years before the FED without considering this. The US-Dollar is not only circulating in the US but is demanded in the whole world. Hasn’t this a huge impact on such kind of comparisons?
Yet I never saw this fact being mentioned when this topic came up. Is there anything (book, paper) that deals with this?
Where the hell does Austrian ECONOMICS say anything about government intervention is evil? Government Intervention has consequences that Austrian Economists have correctly modeled and explained. Whether or not you think those consequences are bad is completely up to you.
Recessions and depressions are one and the same. The term recession just sounds less harsh than the term depression, or the term depression just sounds a lot worse than the term recession.
My personal feelings on the topic of “is the FED a success” is that the creation of the federal reserve to avoid a depression was unnecssary and likely counter productive. If you are just looking to avoid a depression the private market could easily have come up with a more efficient solution then the federal reserve and without the government overhead. The great depression was a “first” for a lot of people with regards to investing, saving, banking, etc. and they didn’t know what they were doing or understand how do properly address the problems that arose. However, expecting people (as a whole) to make the same mistakes over and over again at their own expense is silly and therefor creating the federal reserve to solve the problem was entirely unnecssary.
On a similar vein, correlation does not equal causation. Just because the federal reserve was created after the depression does not mean that is what has avoided a similar situation from arising. It could just as easily be attributed to wars, politics, intelligent investing, etc. Having a single data point does not prove anything about the success of the federal reserve.
Another note that personally bothers me is what the federal reserve has turned into. I would rather have a depression then have a government tax me under the table (printing money/inflation). I hate taxes as much as the next guy but I hate them even more when they are done in such a way as to avoid the popular majority from noticing what is going on.
As for the government’s ability to regulate a market I do not believe that the government can respond as accurately to market needs as a free market can respond to itself. In a free market balance is almost always attained and generally speaking, only regulation results in unbalancing the market. Sometimes a free market can get “out of hand” such as unbacked fractional reserve banking, but the market will always eventually correct itself (i.e.: a bank run). When the government intervenes instead of a bank run you see the government bailing out the banks at the cost of everyone rather than just those who participated in fractional reserve banking. This means that instead of those who made the mistake paying for it and learning from the mistake, the people who didn’t make the mistake also pay for it and the people making the mistakes don’t learn their lesson.
