Austrian Economics Is No Longer The Unheard Music
The comments below are an edited and abridged synopsis of an article by Jeff Deist
In the mid-twentieth century, the Austrian school reasserted itself in America. Progress has been steady. The digital age accelerated everything, and Austrians today have institutional and financial support.
Austrians are right to ask: Is mainstream economics any good? Does it benefit society? Does it accurately predict anything? Does it help us discover truth, or become more prosperous?
Mainstream economists remain mired in mathematics and statistics. They attempt to express economics in mathematical equations. They criticize Mises as a literary economist. They force backward-looking data into forward-looking models. Yet all of this data and empirical testing never seem to explain the booms or time the busts.
The dismal science is in trouble, and it deserves to be. Economic axioms cannot be flouted without consequences, which means the central insights of the Austrian school will prove correct over the coming decades.
Political money will unravel; commodity money will reassert itself. Central bankers will force depositors into the world of negative interest rates, destroying capital and hurting savers. They will do everything they can to avoid a stock market crash, buying assets and propping up equities, while telling us their fiat currencies are healthy—even as they buy more gold than they have in decades.
Governments, businesses, investors and individuals will respond to loose monetary policy by borrowing and spending instead of saving and investing.
The Fed will disavow outright monetization of government spending even as they partially practice it with an increasingly debt-financed federal budget. All of this new money and credit will not be neutral, but will primarily benefit political and economic elites.
This monetary alchemy will not work. Consumption will not substitute for production. Demand-side stimulus, fiscal or monetary, will produce only short-lived economic growth. Underlying incentives will continue to matter.
Debt and entitlements are unsustainable. The Fed’s swollen balance sheet in unsustainable. Moving toward socialism is unsustainable. Austrians will be vindicated, but will they be heard?