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2001 was prior to the crisis. What the Austrian economists were saying after the crisis (which was 2008/2009) that the actions to address the crisis through fiscal and monetary stimulus would cause high inflation, high interest rates and devalue the dollar. The gold-bugs who believed this view, ran out and bought gold.
What constitutes discrediting a theory if not its predictions being wrong? It’s really important to distinguish between fundamental predictions of a model and predictions that an economist happens to make that don’t really come from the model. The prediction that huge increases in the monetary base will cause large increases in the price level, and that big government deficits will cause big increases in interest rates, are more or less inescapable if your model of the economy is one in which recessions are supply-side problems, not the result of inadequate demand. Conversely, the prediction that neither of these things will happen if the economy is in a liquidity trap is a fundamental prediction of Keynesian models. In this crisis, the Keynesians got it right and the Austrians got it wrong.
There is no wiggle-room here -- and resorting to name-calling and calling the side that got it right "morons" doesn't give your view more merit.
Last edited by Ibginnie; 04-16-2013 at 08:31 AM..
Reason: deleted quoted post
2001 was prior to the crisis. What the Austrian economists were saying after the crisis (which was 2008/2009) that the actions to address the crisis through fiscal and monetary stimulus would cause high inflation, high interest rates and devalue the dollar. The gold-bugs who believed this view, ran out and bought gold.
What constitutes discrediting a theory if not its predictions being wrong? It’s really important to distinguish between fundamental predictions of a model and predictions that an economist happens to make that don’t really come from the model. The prediction that huge increases in the monetary base will cause large increases in the price level, and that big government deficits will cause big increases in interest rates, are more or less inescapable if your model of the economy is one in which recessions are supply-side problems, not the result of inadequate demand. Conversely, the prediction that neither of these things will happen if the economy is in a liquidity trap is a fundamental prediction of Keynesian models. In this crisis, the Keynesians got it right and the Austrians got it wrong.
There is no wiggle-room here -- and resorting to name-calling and calling the side that got it right "morons" doesn't give your view more merit.
Yup. EVERYTHING the Austrian camp predicted would happen simply FAILED to materialize - they've had a TERRIBLE track record in regards to how this has all played out - essentially batting zero. It sure doesn't instill confidence that they know what they are talking about.
Ken
Last edited by Ibginnie; 04-16-2013 at 08:31 AM..
Reason: edited quoted post
...There are plenty of challenges ahead, regarding all manner of money, fiscal, and regulatory policies -- entitlements, tax reform, Obamacare, you name it. But falling gold is a market signal that gives me some confidence that these are solvable problems, and that our economic and stock market story will turn out okay.
I think that's the real message of the gold sell-off. It's a good thing, not a bad one
When people start dumping their gold it's because they are moving back to other forms of monetary security or investment.
This is hardly a bad thing, especially in these economic times of gloom and doom predictions, it shows a renewed faith in markets and their performance.
At the time (2009) those who were making these predictions that monetary and fiscal stimulus would increase interest rates, cause inflation, etc. weren't saying these things would happen eventually, they were saying they would happen in the short term. Since it has been four to five years now and these fears never occurred, it's safe to say they have been resoundingly discredited.
Like I said, the go around. No credit to be given to the Austrians who predicted the housing collapse. What a surprise.
Here's one of the Austrians who predicted the housing collapse. Here's what he said back in 2011:
1. Government will raise taxes, no matter who’s in the White House in 2013, beginning with the rich — which Obama just announced — then the middle class. But this won’t solve the debt crisis.
He was right on this one, but that didn't exactly take a genius.
2. By end of 2012, we’ll see 10% inflation, which means a 10-year treasury bond would lose half its value. We could see 100% annual inflation for three consecutive years after.
Not even close on this one.
3. This means many people’s savings will become drastically lower. Some life insurance plans will have big losses. Pensions will become unstable.
Some of this turned out true but not all. All in all it's a relatively vague prediction (savings how much lower?, what does "some life insurance plans" mean?
4. Two more bubbles will burst probably by 2013– of the dollar and of government debt.
Wrong on both counts.
5. By 2016, there’ll be a mass exit of foreign investments from America because of the dollar collapse.
Not to 2016 yet but since the predicted collapse of the dollar didn't happen - and doesn't look like it will, I'd say this one ain't gonna happen either.
6. The housing market will continue to be depressed. Homeowners may lose 8% of home value in 2012. Home prices can fall more than 20% in the next 5 years, once the inevitable interest rate hike comes in.
Way, way wrong on this one.
7. Retirement age will increase to 73. Many will have no choice but to keep working until dead.
This is pretty general an vague "retirement age will increase to 73" - WHEN? In 4 years? In 10? "Many will have no choice but to keep working until dead." - and vague - what's "Many" mean? The number of retirement age people still working DID double - but only to a measly 7.5% of retirees. The overwhelming majority of folks retirement age STILL retire.
8. The worst case scenario is a 90% drop in the stock market and 50% rate of unemployment. But this won’t last forever. America will recover
He wayyyyyy off on both of these. Admittedly he stated these were "worse case scenarios" but what he predicted as that "worse case" turned out to be the exact opposite of what actually happened. The stock market has soared and the UE rate has been steadily (if slowly) dropping.
All in all it seems he was only correct on the "vague" predictions (the one exception being the "raise taxes" one - which was pretty much a "no-brainer") and was WAYYYYYY wrong on the more specific predictions.
The facts are the recent rise in gold prices which are used mostly as a hedge against inflation. The rise is just like that in the 70's when inflation became a problem then a big sale off in the 80;s when inflation dropped.Your bascially betting on infaltion when you buy gold as a investment and need to time the lows and wait like mnayhave done before the crisis by having a portion in holdings.
Here's one of the Austrians who predicted the housing collapse. Here's what he said back in 2011:
1. Government will raise taxes, no matter who’s in the White House in 2013, beginning with the rich — which Obama just announced — then the middle class. But this won’t solve the debt crisis.
He was right on this one, but that didn't exactly take a genius.
2. By end of 2012, we’ll see 10% inflation, which means a 10-year treasury bond would lose half its value. We could see 100% annual inflation for three consecutive years after.
Not even close on this one.
3. This means many people’s savings will become drastically lower. Some life insurance plans will have big losses. Pensions will become unstable.
Some of this turned out true but not all. All in all it's a relatively vague prediction (savings how much lower?, what does "some life insurance plans" mean?
4. Two more bubbles will burst probably by 2013– of the dollar and of government debt.
Wrong on both counts.
5. By 2016, there’ll be a mass exit of foreign investments from America because of the dollar collapse.
Not to 2016 yet but since the predicted collapse of the dollar didn't happen - and doesn't look like it will, I'd say this one ain't gonna happen either.
6. The housing market will continue to be depressed. Homeowners may lose 8% of home value in 2012. Home prices can fall more than 20% in the next 5 years, once the inevitable interest rate hike comes in.
Way, way wrong on this one.
7. Retirement age will increase to 73. Many will have no choice but to keep working until dead.
This is pretty general an vague "retirement age will increase to 73" - WHEN? In 4 years? In 10? "Many will have no choice but to keep working until dead." - and vague - what's "Many" mean? The number of retirement age people still working DID double - but only to a measly 7.5% of retirees. The overwhelming majority of folks retirement age STILL retire.
8. The worst case scenario is a 90% drop in the stock market and 50% rate of unemployment. But this won’t last forever. America will recover
He wayyyyyy off on both of these. Admittedly he stated these were "worse case scenarios" but what he predicted as that "worse case" turned out to be the exact opposite of what actually happened. The stock market has soared and the UE rate has been steadily (if slowly) dropping.
All in all it seems he was only correct on the "vague" predictions (the one exception being the "raise taxes" one - which was pretty much a "no-brainer") and was WAYYYYYY wrong on the more specific predictions.
So that dismisses the Austrian school of economics, or that one Economist? Also, if something hasn't happened yet, does that mean someone is wrong? This isn't the weather channel.
Which is why I jumped the Austrian ship not too long after the election after I found out how much of a crock Austrian economics is. Most of the big names pushing for gold buys, like Peter Schiff and Alex Jones, themselves are invested in significant amounts of gold and have gold companies as advertisers. It was a bubble waiting to pop. I watch Max Keiser on RT on occasion, and he keeps predicting some sort of dollar collapse is going to happen in March, then April, and now I'm sure in May. Discredited. Paranoid being fanned by the goldbugs is what caused gold prices to rise so much
Actually, pointing out that conservatives are pumping gold is disingenuous. There are many many many liberals who were pumping it, including Soros, Buffet, and many hedge fund managers. Now that gold has downward pressure that was instigated by Soros, they've started bailing with tidy profits. Gold, just as any equity or commodity is pumped in the direction the big players wish it to move. Add the bad economic news from big consumers of industrial and investment grade metals, like China, and you have the perfect storm for a plunge. For the big players, it's the ultimate pump and dump. They are now creating a new LOWER entry point.
Because the world monetary entities (FED,EU,WMF) are printing money ad nauseum, inflation is being kept in check. Once inflation re-enters (and it will) and interest rates start climbing, gold will skyrocket again. The likes of Soros are only double dipping on timed peaks and valleys.
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