Why The Austrian Business Cycle Theory Is Wrong

One of the surprisingly popular theories as to why the recession occurred is known as the Austrian Business Cycle Theory (ABCT), which argues that not only is the government not the solution to the recession, but in fact, it is also the cause. It claims that the recession was caused by the government artificially lowering the interest rates and distorting the economy leading to a recession. As you can imagine this theory is very popular among libertarians eager for an excuse to absolve the market of blame for the crash. It is promoted by Ron Paul and Peter Schiff who claim to have predicted the Financial Crash (and the next one too). It is also completely wrong and dangerously so. Continue reading “Why The Austrian Business Cycle Theory Is Wrong”

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The Fool’s Gold Standard

Having money linked to a Gold Standard is an idea that almost every economist opposes. It is described as the economic equivalent of creationism and a major cause of the Great Depression. It is ignored by policymakers and no country has one anymore. Yet there is some support for it on the internet. It is one of Ron Paul’s main ideas in his campaign for the Presidency and is supported to some extent by Paul Ryan. The Republican platform promises a commission to consider reintroducing it. So what is a Gold Standard and why is it so bad? Continue reading “The Fool’s Gold Standard”

Government Did Not Cause The Recession

We are in the midst of the worst recession since the Great Depression. Economists and commentators alike are united in blaming the banks and the lack of restraint on them for driving us over the cliff. Yet there is a myth common on the internet that it was the government that caused the recession. Allegedly it was the government that forced the banks to lend extra and fueled the boom. There are three parts to this argument. It is claimed the government caused the recession by guaranteeing to bail out banks if they got in trouble, by forcing banks to lend more through the Community Reinvestment Act, Fannie Mae and Freddie Mac and by keeping interest rates artificially low. These arguments are unable to explain the timing of the crisis, its magnitude and the fact that it’s global effect. These claims simply do not stand up. Continue reading “Government Did Not Cause The Recession”

Ron Paul – Radical Or Ridiculous?

Ron Paul is either a respectable, insightful voice of liberty or an eccentric old fool clinging to long out dated and daft ideas. A man who will save us from the clutches big government or someone who will deliver us into the claws of big business. Someone willing to challenge the PC brigade and speak the truth or a bigoted racist. A voice of common sense or a man ignorant of facts of life. A brave advocate of a new vision for American foreign policy or an isolationalist crank who wishes to cut America off from the rest of the world. A man who can bring great prosperity to the nation or economic Armageddon. Someone who belongs in the White House as leader of the free world or someone who belongs in a cave wearing a tinfoil hat, muttering conspiracy theories. Continue reading “Ron Paul – Radical Or Ridiculous?”