009 - A Critique of Monetary Policy The Austrian View D Ricardo M Rothbard L von Mises J M Keynes ECO 473 ­ Money& Banking ­ Dr Dennis Foster

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: A Critique of Monetary Policy: The Austrian View D. Ricardo M. Rothbard L. von Mises J. M. Keynes ECO 473 ­ Money & Banking ­ Dr. Dennis Foster Why are there Business Cycles? Flaw of Capitalism/Market System • Observable since late 1700s. • Coincides with Industrial Revolution/Capitalism. • Something inherent in the market. • Will worsen until system collapses. K. Marx Why are there Business Cycles? Flaw of Capitalism/Market System • • • Under­consumption theory. “Excessive spending” causes inflation. “Insufficient spending” causes depression. – aka, too much saving!!! • Need G to stabilize economy! J. M. Keynes T. Malthus No, Really, Why are there Business Cycles? Any theory must explain the following: • • • • Tendency towards repetitive cycles. “Mammoth” cluster of entrepreneurial errors. Why depression is more intense in K­goods. Why retail is the “last and least” to fall. M. Rothbard Hume/Ricardo & Classical Economics: • • It’s not markets, but banking that is the key. Banks expand credit and fuel inflation. – Because it is a “fractional reserve” system. No, Really, Why are there Business Cycles? ∀ ↑ imports, ↓ exports, ↑ gold outflows. • Banks get nervous, ↓ credit, causing recession. D. Ricardo D. Hume No, Really, Why are there Business Cycles? von Mises & the Austrians Central bank precipitates cycle. L. von Mises Effect is to ↓ interest rates. Leads to unsustainable increase in Investment. Eventually, the recession comes to correct for this unsustainable path. Explains all the salient features of cycle. • • • • F. Hayek How should gov’t. address Business Cycles? von Mises & the Austrians • • • • Stop inflating money in the first place! L. von Mises Don’t bail out troubled firms! Don’t inflate to get out of the depression! Don’t encourage more consumption! Looking at our present situation, Austrians would argue that the recession will . . . F. Hayek A Critique of Monetary Policy: The Austrian View D. Ricardo M. Rothbard L. von Mises J. M. Keynes ECO 473 ­ Money & Banking ­ Dr. Dennis Foster ...
View Full Document

This note was uploaded on 10/22/2010 for the course ECO 473 taught by Professor Foster during the Spring '07 term at N. Arizona.

Ask a homework question - tutors are online