August 11, 2009
The stock market fell again today in New York as the Bears and the short sellers and the anti-Keynesians and the bi-polars re-emerged from the woodwork . There is of course room for caution and elevated unemployment will continue for some time.
But some of the analysis one can see on networks like Bloomberg business news is simply nonsense. Some analysts who are clearly wedded to the work of Hayek, von Mises and Rothbard and the Austrian school continue to prematurely dismiss the stimulus, dump on Keynes and argue , quite perversely in my view, that the best solution is to let markets solve the problem by liquidating bad debt and driving failed business from the market place and allow the consequences to fall where they may including the disasterous unemployment that would flow from following this advice. In presenting their argument they also misrepresent the history of the great depression by using selective quotes and data.
In this sense they remain loyal to Hayek who throughout the 1930s was a strong critic and opponent of Keynes. Indeed, Lionel Robins and his allies had brought Hayek to the L.S.E. from Austria for precisely this reason.Not much has changed. Expect more vociferous criticism from the Austrians. The criticism is welcome and useful but spare us the historical distortions.
Luckily governments have not been listening to this bad advice for the moment.But stock markets which are still in a fragile post traumatic shocked state after the great crash of fall 2008 are easily spooked by this kind of talk and any bad data reports. They require some patience and contemplative calm, but patience is not a virtue among the hyperactive blackberry set who dominate the trading community.
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