Bob Murphy on the debt crisis, the Great Depression, and gold

GoldMoney’s Alasdair Macleod discusses Austrian economics and the current state of the world economy with the Mises Institute’s Bob Murphy, who also runs the website Murphy gives a broad outline of how Austrian economic analysis differs from Keynesian analysis, and how this leads economists from these rival schools to propose radically different policy recommendations.

He pays particular attention to the example of the Great Depression, where conventional (Keynesian) wisdom holds that FDR’s stimulus measures contrasted with “tight wad” Hoover’s fiscal austerity, and that the former were instrumental in ending the Depression. But as Murphy discusses in his book The Politically Incorrect Guide to the Great Depression and the New Deal, this narrative is seriously misleading.

Turning to current events, Murphy discusses how governments are engaged in a never-ending effort to “postpone the day of reckoning” as far as the economy is concerned: in the late 1990s, the bursting of the tech bubble led the Fed to pump up a housing bubble. When the housing market collapsed in 2008, threatening major bank failures, this led governments to step in and guarantee bad bank debts. But given that these bailouts now threaten the solvency of governments themselves, Murphy thinks that governments and central banks have run out of road, and that we risk currency crises if the authorities continue to resort to money printing as a solution.

Murphy is optimistic on precious metals, and thinks “the only long-term direction is up” for gold and silver prices, owing to the continuing money printing he expects from central banks.

This podcast was recorded on 24 August 2012.

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Alasdair started his career as a stockbroker in 1970 on the London Stock Exchange. In those days, trainees learned everything: from making the tea, to corporate finance, to evaluating and dealing in equities and bonds. They learned rapidly through experience about things as diverse as mining shares and general economics. It was excellent training, and within nine years Alasdair had risen to become senior partner of his firm. Subsequently, Alasdair held positions at director level in investment management, and worked as a mutual fund manager. He also worked at a bank in Guernsey as an executive director. For most of his 40 years in the finance industry, Alasdair has been de-mystifying macro-economic events for his investing clients. The accumulation of this experience has convinced him that unsound monetary policies are the most destructive weapon governments use against the common man. Accordingly, his mission is to educate and inform the public in layman’s terms what governments do with money and how to protect themselves from the consequences.

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