Monday, 23 September 2013

Fear the Boom, Not the Bust

By Frank Hollenbeck

If you listen to TV commentators, you’ve been told the worst is behind us. Growth is picking up, and Europe is coming out of its slumber. No one seems to be concerned that this tepid below-2-percent growth is being entirely fed by the central bank’s massive money printing. It’s a “growth at any price” policy. How quickly we forget.

Back in the boom days, anyone who questioned double-digit growth in housing prices was viewed as an unenlightened Cassandra, lacking knowledge on how the new economy had fundamentally changed the law of scarcity. Austrian economists consistently warned that a boom built on foundation of easy money could only lead to a disaster. Today, most of the growth is coming from the interest rate-sensitive sectors of the economy, such as cars and housing. This should be ringing warning bells everywhere.

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