Wednesday, August 23, 2006

Robert Samuelsson Goes semi-Austrian

I don't know whether it was from reading my criticism of him or not, but Washington Post columnist Robert "Not related to Paul" Samuelsson have now realized that the origin of the U.S. housing bubble (which might now be on the verge of bursting) was indeed the Fed's artifical suppression of interest rates, something which can only be achieved by inflating the money supply. By contrast, in the article I criticized, he claimed that the root cause was that the Fed had not created enough inflation.


Anonymous Entropy at work said...

Samuelson certainly made some errors in his admirative evaluation of Greenspan. As you note, Volcker initiated the anti-inflation policies; Greenspan merely continued them. But then, Volcker was appointed by Carter and US conservatives are generally uncomfortable giving Carter credit for anything, from monetary policy to engaging the Soviets in Afghanistan to the arms build-up that put additional pressure on the USSR's weak economy. Better to cite Reagan and his appointee.

But if Samuelson is providing a more accurate assessment of the causes of the housing bubble in his last article, it hardly holds that he is doing if from Austrian principles. He doesn't question the principle of intervention, only whether is is effective enough.

I also note your claim in your original critique:

What Samuelsson refers to as "disinflation" is simply that monetary inflation to a higher extent than in the 1970s have taken the form of asset price inflation rather than consumer price inflation.

Does this mean that the expansion of the money supply has primarily ended in the pockets of the upper classes who invest in stocks and bonds, rather than the pockets of workers who spend all their income on consumption?

11:28 PM  

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