Comment 29893

By beancounter (registered) | Posted April 02, 2009 at 21:37:45

Ryan said "...letting the economy flush all those bad investments out of its system, (is) somewhat akin to the way doctors used to bleed people when they had fevers."

Although that's an interesting analogy, which coincidentally seems to equate Austrian economic theory somewhat to dangerous quackery, I think a more apt comparison would be the draining of an abscess. Blood is generally a good thing to have in your body; what you want to do is get rid of the bad stuff.

There are economists who believe, as you suggested,Ryan, that the bad stuff in the dangerously bloated economic body resulted from the manipulation of the Federal Rererve System. Artificially low rates of interest resulted in sending the wrong signals to players in the economic system and caused a great deal of malinvestment. Thus the current economic problems resulted from overstimulation of the economy. And the cure, according to "economists from Milton Friedman through John Maynard Keynes" is ... more stimulation. Would this be like pumping more pus into the abscess?

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