Austrian Economics and Deflation in The Greater Depression?

By Delwyn Lounsbury - THE DEFLATION GURU

The Austrian economics school of thought favors small government and gold backed money as their main principles. Followers of Austrian economics believe emphatically that the larger the credit inflation the larger the crash when credit deflation starts in earnest. The money supply starts dropping faster than government can create money and credit. The deflation is the cure for too much credit inflation as unemployment rises, lenders become afraid to lend, borrowers become afraid to borrow and the crash and depression are then unstoppable.   Currently the whole world is experiencing an unsustainable credit creation climax in the economy.  In addition, the Austrian economists favored libertarian thinking, free enterprise, small government and freedom.

Early Austrian economics scholars were Eugen von Bohn-Bawerk, Ludwig von Mises, Nobel laureate Friedrich Hayek. Henry Haslet, Murray Rothbard and Carl Menger were later proponents. Haslitt wrote a line-by-line critique of Keynes's “General Theory” work.

These men advocated property rights and freedom to contract and trade while opposing onerous taxes, price controls, big government and regulations which they felt all inhibit the entrepreneurial process.

They were for  the following:  a gold standard, sound money, balanced budgets, free trade, free enterprise, no monopolies, no export subsidies and for sure no government intervention and bailouts.

They rightly showed that the 1930's stock market crash and subsequent economic downturn was an Austrian economics business cycle event and a result of bank credit expansion in the Roaring 20's.

Joseph Schumpeter called them the first real economists.

Socialism, Mises predicted, would end in utter chaos and the end of civilization. Keynesian economic theory which all modern governments and most current economists subscribe, with attendant big government can cure all and fix all credo, will lead us to the chaos and hyperdeflation.  The nightmare the Austrian economics school of thought warns about is the result of credit inflation.  It happens every time there is credit inflation on the scale we have seen since the Federal Reserve Bank was formed in 1913.

The deflation economics cycle top started with the 2000 dot com stock mania bubble climax peak may not end until 2016 to 2018. At that time most of your assets may have lost 90% in price and unemployment could be 30%. Even the price of gold may drop in half. CASH IS KING in deflation. Japan has seen deflation for 20 years and now the rest of the world is catching the epidemic. You cannot stop the pendulum from swinging. Deflation economics will continue until the inflation is wrung out of the system in this Greater Depression.   Just like Austrian economists warned.

Austrian economics says gold must back a private (free enterprise) money or governments will inflate the heck out of a fiat money.  Fiat money is money with no backing.  Fiat is a French word meaning “let it be made.”  Finally, all credit inflations (as opposed to currency inflations, which are bad enough) end in a crashing credit collapse.  You and I are already 11 years into this Greater Depression which will result in a 90% plus drop in most assets values, a 50% drop in the price of gold and 30% unemployment. 

The Anglo financial power elite that want to be "Big Brother" in a new-world-order/one-world-government will have already sold most of their real estate and now will be selling and shorting stocks, commodities and all but the most pristine government debt.  Bonds may still loose value big time when interest rates rise as people and businesses scurry around borrowing to stay afloat.   Many junk bonds bondshttp://www.deflationeconomy.com/bonds-and-deflation.html">bonds> may go to zero..mises dot org is the web site for the Ludwig von Mises Institute and a great source of information about Austrian economics and inflation leading to deflation and then the Greater Depression.

Finally, Austrian economics says these elite will want a strong more valuable U.S. dollar since most of their money is in the safety of America and Wall Street.  They have will be planning to buy assets back at "fire sale" prices of 10 cents on the dollar after 2016.  Cash Is King in a depression.  Hurry and get prepared!  Austrian economics is important to your families survival!  Austrian economics says all credit inflations end in a nasty violent credit deflation - like the one we are having now.  EVERY TIME!

Copyright 2011 by Delwyn Lounsbury - THE DEFLATION GURU
Use of this article allowed with attribution back to:
http://www.deflationeconomy.com