Economics Questions

Re: Will no inflation = refuation of Austrian Theory?

krazy kaju — Wed, 11 Feb 2009 23:24:07 GMT

No. Austrian theory includes both sides of the inflation equation: money supply growth and economic growth. If the amount of goods grows more than the amount of money chasing those goods, you will have deflation.

Re: Will no inflation = refuation of Austrian Theory?

fezwhatley — Wed, 11 Feb 2009 20:40:17 GMT

If prices remain stagnant, or even slight deflation during a prolonged economic boom period then that means another deeper recession. If the economy starts making a recovery, and productivity starts approaching maximum potential and prices are not falling, then that is a bad sign and is in line with Austrian theory.

Re: Will no inflation = refuation of Austrian Theory?

John Ess — Wed, 11 Feb 2009 20:25:17 GMT

Inflation could happen even with the same prices or slightly lower. It could just be more competition or better production methods.

What the inflation is, though, is that it would have been much lower prices had the inflation not occurred.

For instance, if computers were as bulky and expensive but not a higher price in total as in 1952, obviously this would still be ridiculous. As one should expect that computers would be much more abundant and at a lower price over time. Even the fact that they are much less expensive today than before is not proof that the dollar hasn't lost much value over time because of greater circulation. Obviously it has judging by the prices of say silver.

Re: Will no inflation = refuation of Austrian Theory?

pairunoyd — Wed, 11 Feb 2009 19:48:44 GMT

Maybe a surge in production could taint the austrian school's rep. Some backwards hillbilly with a greasy wrench could invent a labor saving device.

Re: Will no inflation = refuation of Austrian Theory?

Jon Irenicus — Wed, 11 Feb 2009 19:44:01 GMT

Indeed. Strictly speaking this is a 'thymological' question.

Re: Will no inflation = refuation of Austrian Theory?

Bogart — Wed, 11 Feb 2009 19:37:00 GMT

No. The Austrian Theory can not determine specific times and events as no one knows consumer preferences and no one can predict the advancements in technology. The Austrian Theory does explain how terrible inflation is and what it does to an economy.

Look at the past several recessions experienced in the US, the inclusion of China among others in the division of labor and the advent of better technology minimized the effects of inflation through central banking.

Re: Will no inflation = refuation of Austrian Theory?

Stranger — Wed, 11 Feb 2009 19:28:19 GMT

Austrian predictions are conditional on what the institutions of banking end up doing. If the Fed suddenly decides to save the dollar, and stops all inflationary lending, then there may not be any future inflation.

Will no inflation = refuation of Austrian Theory?

lederuvdapac — Wed, 11 Feb 2009 18:54:52 GMT

Like many Austrians I realize that the massive amount of credit and debt being plunged into the US economic system will have terrible consequences for the dollar and will most likely lead to problems of high inflation and/or stagflation. My question is: If after the next couple of years, there is no noticeable impact on the prices of consumer and capital goods in relation to the dollar, will this refute a portion of Austrian theory? Perhaps not refute, but possibly force some adjustments? Obviously this is pure speculation on future events, but does the relationship between the current financial crisis and Austrian economics depend on inflation?