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Showing posts from February, 2013

The $59 Recession Solution

Joseph Salerno, professor of economics at Pace University and author of Money, Sound and Unsound, recently taught a course in Austrian Macroeconomics at the Mises Academy.  For a $59 registration fee that included all the reading material, anyone with access to the internet could sign up. As with all Academy courses, the lectures were recorded and are made available to students indefinitely.

In his final lecture Salerno presented the Austrian Business Cycle Theory and showed how, during a recession, the policy prescriptions of the Austrians differs from those of the Keynesians.  The chart below summarizes and contrasts the policies.

What follows is my understanding of the chart, and any errors of interpretation are mine alone.  In English, the chart reads as follows:

Fiscal policy, Austrians: Lower Taxes (down-arrow T), reduce government spending (down-arrow G), and balance the budget (Taxes minus government spending equals zero).  Note: Paul Krugman would likely condemn this policy as …

Currency wars are fiat wars

The financial press is tossing the term “currency war” around with more abandon than partiers circulating punch at a New Year’s bash.  Most commentators tell us we’re having such a war right now, though at least one denies it.  James Rickards has published a book on the subject that’s become a hot seller.  So what exactly is a currency war and why are nations engaging in it?

Wikipedia offers an explanation that reminds me of a man traversing a rickety bridge over a deep canyon.  The first few planks feel secure, leading him onward to the middle, where the bridge sags and sways in the canyon’s updrafts.   We read that a
Currency war, also known as competitive devaluation, is a condition in international affairs where countries compete against each other to achieve a relatively low exchange rate for their own currency. Why would countries devalue their currencies?
As the price to buy a particular currency falls so too does the real price of exports from the country. Cheaper exports mean…