Could It Really Be That Simple?

by Chuck Donovan

The trouble with Austrian Economics is that it isn’t really all that exciting.  There aren’t any colorful, eye-catching graphs.  There are no big equations you can wow your friends and audiences with.  Austrian explanations to the economy and related issues fail to fire up the emotions and cheering of an audience, and listeners do not get to have their ego’s stroked nor hear the usual rally cries that punctuate deliveries by Keynesians and other economists.  Austrian economics is just to full of lowbrow common sense.  Most listeners acclimated to the tangled logic of subsidies, stimulus, regulation, monetarism, velocity of circulation, multiplier effects, and other academic sounding terminology think things just couldn’t be as simple as the Austrians explain them.

Could they?

Ron Paul seems to have just that kind of effect on established rightwing voters.  His speeches lack the cheerleading voters desire.  His answers are shrugged off as overly simplistic, or dogmatic, or too ideologically pure.  Running as a Libertarian I had the same reaction to the answers I presented.  Voters let me know that things just aren’t that simple.

Are they?

And so, the repetitive, folksy sounding explanations from Austrian economists drone on with little fanfare and less interest from voters in search of something more action oriented.  From Ron Paul last week:

”The uncertainty caused by the Fed does help some people — professional traders on Wall Street for example.  Increased volatility and huge price swings mean more opportunities for profit, as sophisticated electronic trading programs can buy and sell huge positions within a fraction of a second of a major market movement.  But small businessmen are misled by the artificially low interest rates into making unwise investments, and those whose jobs vanish when the Federal Reserve’s latest bubble pops suffer.  Without the knowledge or ability to move with the markets or diversify overseas, average Americans see their savings stagnate or depreciate — along with their hopes and dreams for a better tomorrow.

The only way to return to a sound economy is for the Federal Reserve to cease and desist its monetary manipulation and allow interest rates to be determined by markets, just as the price of goods, services, and labor should be determined by markets.  Everything the Fed is doing by pumping money into the economy benefits only the insolvent, too-big-to-fail banks.  Low interest rates encourage consumers to take on more debt, meaning more profits for the banks issuing those loans.  Purchasing mortgage-backed securities, as the Fed has done, keeps housing prices inflated, helping the banks who have non-performing mortgages on their books.  However, it hurts consumers who continue to be priced out of the housing market.  In order to maintain a decent standard of living for the American people and to restore the vibrancy of the U.S. economy, it is time to end the Fed.”

It just can’t all be that simple.

Can it?



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