Really Interesting (and perhaps historic?) discussion I saw today on CNBC

Economics Economics Questions
1

As most people on this forum probably know the debate amongst free market economists about the cause of the Great Depression has always been whether the money supply was too loose (Austrians) or too tight (Chicago School Monetarists). This post is pretty long so please bear with me I hope it’s worthwhile.

Earlier to day I watched Kudlow and Company and Larry Kudlow (who strangely is listed as an adjunct professor with the Mises Institute http://mises.org/faculty.aspx) basically says that the recent infusion of money via Friedman’s Monetarist Theory (his own terminology!) will stave off any Great Depression. He repeats his enthusiasm with the infusion roughly 6 or 7 times throughout the program. This period seems like a clear monetarist empirical case to me and definitely an event in which Austrian theory should be able to predict the consequences. I think this is an historic chance for us to witness who is correct: the Chicago School or the Austrians.

What really surprised me is that Mark Skousen (who I know is aware of the Austrian position and I originally thought favored it) was also on the show and seems to give his assent to the infusion without completely endorsing it. I really suggest (and even ask that) people watch the videos at the following links. I think I’m going to try to get a copy of the show as well. This is pretty remarkable in my opinion. I’m not an economist but I’d like to see what some of those who are Austrian inclined have to say.

It’d also be great if a real Austrian economist could write up an article or even a blog post about this material. I wish there was enough pull to have an Austrian economist show up on Kudlow’s show itself. I mean I thought Skousen would have done the job but I guess he feared being labeled out of the mainstream. Kudlow also has people like Don Luskin on the show quite often and links to him on his shows page (http://www.cnbc.com/id/15838446) so it’s unfortunate there is no one calling for at least a tightning of the Fed (if not the radical position of returning to the gold standard).

Also why isn’t Volcker’s tightning of the fed during an economic crisis referenced at all. In my opinion it’s what saved the economy and led to the recovery by removing the excess credit. Instead they’re all yelping for more credit when they should (if they want to work within the system we have) tighten. I haven’t even seen Austrians even talking about this.

Anyway here are the video’s. I’ve listed the relevant times but if you have time to watch them in full it’s worth it b/c Kudlow and his guest say some other interesting things.

The most in depth discussion: “The Fed Actions Today” @5:45 http://www.cnbc.com/id/15840232?video=880174889

Another mention of the money supply: “Market Drilldown” @1:45 and 3:15 http://www.cnbc.com/id/15840232?video=880193037

Mark Skousen and Money Supply and then Kudlow saying “I don’t give a hoot about inflation”: “How to Play This Market” http://www.cnbc.com/id/15840232?video=880207664

Here is the generic link for the latest videos from CNBC: http://www.cnbc.com/id/15839263/?tabid=15839796&tabheader=false

Also doesn’t Kudlow always sound like a shill for the economy? It comes out even more in this show.

2

I standed corrected on one point. I just saw the last half of Glenn Beck’s show where Austrian Peter Schiff was on with Stephen Moore (founder of Club for Growth) and some investment adviser. They ALL agreed a hike in interest rates should be made. Really surprising. I’ll see if I can get the video.

3

Found the Glenn Beck video at http://www.ronpaulforums.com/showthread.php?t=161475, the interest rate comment is at 29:00 in. This whole video was great to watch.

4

There was somewhat of a controversy on one of the Mises.com blog posts about the Ayn Rand Institute’s treatment on this very issue of tight monetary policy vs. loose monetary policy and the Great Depression. My position on the matter is somewhat middle of the road, I suppose you can say. My opinion is that the Fed was too loose all throughout the boom and even toward the beginning of the bust. Then they proceeded to tighten the money supply by a third (I think it was), which made the Depression that much worse, unnecessarily. In fact, I think many Austrians will concede that point. But I see the Monetarist view as very wrong because it was the expansionary monetary policy in the first place that caused a bust. A bust is a good thing in the sense that it purges the malinvestments and brings the economy back into line. So the argument on whether the Fed should have pulled all the monetary stops to avert a deflation or not is missing the point, the Fed should have never been there to manipulate the money supply to begin with.

5

This is somewhat out of my league but I’ve heard people say it would cause the whole system to collapse. What are the domestic and international implications of 20 to 30% interest rates with the amount of debt we have?

6

Frank Shostak’s daily articles should be printed, read and distributed by everyone who has an opinion on this issue.

http://mises.org/articles.aspx?AuthorId=115