Hi,
this is just to introduce myself as a person who is interested in these things. Stop. I’
m afraid I’ve said too much. And also to point out an article by Brad DeLong on the on-line Foreign Policy site
This article is crap. Also, Hyman Minsky believes that recessions are “good” and “necessary,” Like the Austrians, he believes that the recession purges the economy of imbalances, but unlike the Austrians, he also believes that it “restores sanity” (acts as a check on greed). Minsky’s theory is very much Schumpeterian (long-waves, and short-waves along the long-waves, etc).
Brad DeLong misses the point as usual of what is sweeping across Europe and hopefully the USA. The distortions come in the boom period caused by banking created money and artifically cheap credit. WIthout the boom there would not be a bust. But now that we are in a bust what can we do. The best thing to do is nothing, that is to have people who made bad decisions feel the consequences of those decisions. These bailouts are doing several negative things: 1. They are causing further distortions in the production process that will lead to further busts later one. 2. The process of bailing out firms is by creating money and thus reducing the value of current savings. 3. The worst hit with inflation from the bailout process are the lower classes as larger portions of their earnings are spent on food and energy (Note that these are taken out of most inflation measurements). 4. All of the penalizing of savers at the expense of debtors and poor decision makers creates “Moral Hazard” problems where the bailed out folks just double their bets down in the hope of future bailouts for their behavior.
Murray Rothbard had a much better approach which is to actively liquidate failed enterprises: Fannie Mae, Freddie Mac, GM, AIG, etc and devote these resources to entrepreneurs and investors in the hope that these additional savings will allow these folks to build a new economy. Otherwise you end up stealing savings and continuing businesses that consumers do not favor.
Now that’s a completely out-of-context take on Nietzsche.
So whatever sobriety that is occurring can be explained by ‘ressentiment’? Are we then to conclude that the Keynesians are the ‘strong’ and the Austrians the ‘weak,’ the latter having their rare chance to gloat because of the ‘mysterious’ inability of the economy to recover?
And even Nietzsche did not write about destruction for destruction’s sake, in the way Delong interprets the notion of “Downturns are good.”
And Nietzsche’s abyss aphorism does not even make sense in the context of Delong’s article. The actual aphorism begins with “In battling monsters, one must take care not to become a monster oneself. And when you gaze into the abyss, the abyss gazes into you” or something like that.
As I said, a completely uncalled-for and erroneous citing of Nietzsche.
It’s bad enough that none of the big Austrian economists (Mises, Rothbard, Hayek) have shown an appreciation or understanding of Nietzsche; now you have Keynesians misinterpreting Nietzsche, and to a far worse degree.
Adding to the badness of the article, is of course the complete misrepresentation of the Austrian theory.