AUSTRIAN ECONOMICS ADDICT

Quantitative easing (Photo credit: duncan)

Peter Schiff explains what will be the end result of QE 3, in this article Operation Screw at Euro Pacific Capital Inc’s site. Who should we believe about the chances of QE3 succeeding, Peter Schiff, who predicted the 2007 economic meltdown, or the Federal Reserve’s policies, embodied in the person of Ben Bernanke it’s chairman. The policies of credit expansion by lowering interest rates and printing (counterfeiting) money caused the original meltdown and continues to stall any chance at real recovery. Schiff understands Keynesianism and the Austrian Business Cycle Theory. Kenynesians try to cure the bust which follows the artificial boom with more cheap credit, below market interest rates, and increased money supply by counterfeiting. The Austrians want to keep the artificial boom from happening by letting the market decide interest rates, and also decide what will be used as the unit of exchange aka, money. The bust is the reallocation, through the free market process, of previous misallocated resources brought about by Federal Reserve’s policies. The Keynesians do everything in their power to prevent the cure from happening. That’s like not prescribing chemo therapy or radiation therapy to cure a cancer patient because the side effects are too unbearable for the patient compared to his death. For a more in-depth explanation of business cycles and their causes read this article by Murray Rothbard at the Mises Institute.