Saturday, May 8, 2010

Green Shoots and Stock Market Crashes

The “Austrian” theory of economics, a philosophy practically ignored in academia, is in stark contrast of what is normally taught in textbooks. Economic recessions and panics are the result of government intervention in the affairs of business and people. On the other hand, Keynesian theory, which is the dominating perspective taught in schools around the world and it is what most of policymakers believe to be the truth, teaches that markets are inherently unstable and therefore need government intervention.

Those of us who adhere to the “Austrian” view of economics, events such as the recent stock market crash that happened on Thursday do not come as a surprise. Massive government intervention produces misallocation of capital, which will unravel once the intervention decreases or stops. Read here what I wrote recently about what lies ahead.

I can bore you to death on the economic technicalities of what “Austrian” economic theory says and how it works…or you can hear what this man has to say.

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