Reply To: Great Moderation


The “1983-2000, the FED did a good job of stabilizing the economy” is fully consistent with Austrian Business Cycle Theory (ABCT). Mises, Heyek, et al teach that money creation by a central bank will generate economic activity especially in capital goods. The problem is this boom is doomed. It represents allocations of available capital to projects that will fail (i.e. the Dot Com Bubble). The Austrians recognize the response to the ultimate economic crises is to allow the liquidation of these failed enterprises (let the bankruptcies remove the bad projects and their authors from the scene).