On Aug. 7, 1929 the following was written in Outlook and Independent:
“In many ways this has been the most remarkably cheerful summer in recent financial history. The stock market speaks for itself…This prosperity might be disquieting if it were accompanied by any of the symptoms of inflation.”
Sounds like the same can be said about the stock market today, right? Stocks have been heading upward thanks to the artificial stimulus from the Fed. Surely there are those who believe it to be real “prosperity” instead of the “wealth effect”. And definitely, there are those who say there are no “symptoms of inflation” today either. In fact, there are multiple calls for the Fed to crank up the printing press even more. Keynesians like Paul Krugman think that inflation is not high enough!
In 1929, those who saw “price stability” and no inflation were caught completely off guard.
Murray Rothbard would write:
“The fact that general prices were more or less stable during the 1920’s told most economists that there was no inflationary threat, and therefore the events of the great depression caught them completely unaware.”
Here’s a news flash: Economists (outside of the Austrian School) will be caught completely unaware again.
That’s not to say that we are on the cusp of another major stock market crash. We may or may not be. But what we do know is that (like the 1920’s) the Fed has been dropping dollars from the skies like there’s no tomorrow. That severely harms the structure of the economy. We do know that the Fed kept in business firms that should have gone bankrupt in 2008. That also severely harms the structure of the economy. We know that there have never been more regulations on business and employment then there are today.
The government and the Fed keep squeezing and squeezing.
Meanwhile, the Keynesians say “Keep printing”! “Keep printing”! “There’s no inflation”!
Getting caught completely unaware is the only science that these people have mastered.
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