Tuesday, March 30, 2010


This should be an interesting discussion. I think the concept is intriguing, whether or not it has merit. Mr. Thornton certainly presented a fair amount of evidence and looking further into Mr. Lawrence's research would doubtless turn up more evidence. I'm not sure what I think about the idea yet.

I don't feel like I am on the same level as people like Rich who are econ majors and actually understand how the Fed and the business cycle work and are related so I'm hesitant to give my opinion just yet. I downloaded the lecture onto my iPod and plan to listen to it a couple times more before Thursday and hopefully will do some more research on the subject so I can be prepared on Thursday.

Until then......here's to Laser-Powered robots!


  1. The Austrian take on the business cycle in a nutshell is that the Fed, through expansionary monetary policies artificially lowers the interest rate. The low rates create an extended period of "easy money" enticing firms to expand production, build new factories, and take up other risky projects that they otherwise wouldn't invest in. Eventually when the rate starts to adjust back to a more natural level firm's will realize that a lot of their projects were bad ideas in hindsight. The economy contracts and goes into recession and the Fed steps right back up to re-inflate the bubble with, you guessed it... more expansionary monetary policy. This results in more erratic fluctuations in the business cycle than would appear if the government had just kept its big nose out of the economy in the first place. A good, quick primer is available here.


    The ABC was hypothesized as an alternative to the Keynesian approach to macroeconomics that was prevalent at the time. The Fear the Boom and Bust video that we've all seen is an entertaining introduction to the debate between the two schools of thought and this article, from the Daily Kos of all unlikely places, does a good job of quickly fleshing out the basics.


  2. Very good summary and links, thanks Rich.