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Originally posted by drew hempel
reply to post by mnemeth1
Greenspan did not predict the bubble. The average U.S. citizen does not know about the "Austrians" -- unless they've studied economics. Greenspan though was an "Austrian" economist! I equate Austrian with monetary stimulus versus fiscal stimulus.
Alan Greenspan would certainly not say that he is a Keynesian. He might say that he is a Wicksellian--a believer in equilibrium real interest rates, and in the roleof the central bank in stabilizing the economy by interest rate management.
Of course, in practice there seems to me to be very little difference between a follower of Lord Keynes and a follower of his Swedish contemporary, Knut Wicksell
At the height of the bull market, allies of the Austrian school of economics held a conference at which most participants emphasized the role of the Fed in creating the boom.
Alan Greenspan's actual policy views may stem from his tryst with Austrian economics about forty years ago, when he was a successful, independent economic consultant and member of Ayn Rand's "inner collective" of Objectivist intellectuals. Austrian School writings were especially emphasized by various members of that group, which at one time included preeminent Mises scholar Murray Rothbard. If Mises's former student Alan Greenspan was influenced by Mises and other Austrian School economists, part of that course may shed some light on the current discussion of Fed policy, especially Greenspan s lectures on "time preference" and "the rate of future discount."
When two Austrians disagree, they do not shoot it out; rather, each of them tries to come up with a better argument next time, but usually the disagreements remain. Things are not at all different in mainstream economics. It is a grave error to believe that empirical field studies provide something like a final verdict on a contested question. The empirical record shows that disagreements between positivists remain in the face of even the most impressive findings.
Stiglitz has been recorded saying that Greenspan “didn’t really believe in regulation; when the excesses of the financial system were noted, [he and others] called for self-regulation—an oxymoron.” Unregulated capitalism and sustained growth is another one of those oxymorons. It’s about time the Austrian school of economic thought be buried 6 feet under.
Even within such groups as the Austrian school, at least one thinker has argued that full-reserve banking would impose similar costs of price adjustments in reaction to growth (through a reduction in the overall price level) as would inflation, and hence offer no inherent advantages over fiat currencies and fractional reserve banking.