Fed Chairman Bernanke spoke about misconceptions and I agree. One of the misconceptions I see is this debate of Hayek vs. Keynes schools of thought.
You see these Occupy Wall Street people demonstrating outside big institutions, claiming these firms’ actions are the cause of the economic slowdown in the world.
I don’t know if I am the only one seeing a contradiction here, but the Austrian School of Economics believes that markets work better than governments. Their economic theory is that corporations should be allowed to make unique choices and take unregulated risks based on the advantage they have in the marketplace.
But it gets better. At the same time they target big corporations, they also target the Fed for the “monetary driven” economy, “let’s abolish the Fed”, they’ll claim!
Their view is that the Fed is responsible for financial economies’ bubbles and the culture of spending more than we earn. It is important to keep in mind that these are valid concerns here. It’s just that simplifying these ideas automatically is not one of them.
But if they simplify complex ideas to simple one line economic theories...then I also, could ask simple questions that require a one line answer:
Do we prefer people and corporations to save or channel savings into investments that would create more job opportunities?
After a financial bubble and burst cycle, aren’t the economic benefits on aggregate one that creates more money and wealth?
And isn’t the alternative to no financial bubbles one of less tangible outcomes, where finances become immobilized and people end up equally poor?
Lastly, hasn’t the private sector proven to be unable to stimulate the economy and shouldn’t the government step in since it has a more mechanical approach than the organic private sector?