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It seems that Wenzel’s invitation was in part because he had successfully forecast the housing crash, while the Fed’s economists had been unable to foresee it. In the Q&A that followed, one economist stated that before the Fed, there had been worse economic crashes. Putting aside the impossibility of ever establishing whether or not this is actually true, such crises as there were originated in either natural disasters, such as crop failures in an agricultural-based economy, or the expansion of bank credit fuelling speculative bubbles. Today crop failures do not have the same impact, but fluctuating levels of bank credit certainly do and are a key factor behind the accumulation of debt.
Ron Paul’s debate with Krugman received more attention
than Wenzel’s speech, given that it was televised. Their debating techniques
differed, with Paul sticking to facts, emphasising the unproductive cost of big
government and the Fed’s destruction of savings through monetary expansion.
Krugman put forward his beliefs, based on his version of history, which we were
required to accept without question. The problem with history is that analysis
of it is always subjective. Canute apparently sat on his throne on the beach,
and commanded the tide to recede. Did he do this because he believed he was a
demi-god who could command the elements, of did he wish to show his admiring
subjects that he wasn’t all-powerful? Both views are valid depending on the
position the historian takes, and that is the weakness of any historical
analysis.
There is nothing new in this. Carl Menger – the founder
of the Austrian School – came up against the German Historical School, which
relied on a subjective interpretation of Prussian history for economic policy.
It was this school that derisively termed Menger’s school as provincial, or
Austrian.
Not much has changed in economic debating techniques.
But please note that Austrian economics, which argues from a strong and
well-reasoned theoretical analysis of human action, still endues and is
enjoying a revival. The Historical School is now a footnote in history, as
surely as Keynesianism will be one day.
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