One of the more astute financial market analysts out there, John P. Hussman of Hussman Funds, has published a research update that relies heavily on Ludwig von Mises.
Hussman argues that the current economic recovery lacks a firm basis because it’s largely based on the infusion of mass liquidity:
If one looks back to the recent housing crisis, it is clear that the policy emphasis on easy money was one of the primary elements that created the illusory prosperity of the housing bubble and eventually led to crisis. The same is true of the various other crises that we have observed over the past decade. At present, I am convinced that the misguided policies that have been pursued in response to the recent downturn will again be reflected as significant new strains within a few years, if not sooner.
To support his analysis, Hussman quotes various passages from the late 1920′s and early 1930′s in which Mises predicted a downturn (which came to be known as the Depression, of course) on the argument that excess money creation was generating malinvestments.
For those interested in the financial market applications of the Austrian school, Hussman’s piece is highly recommended reading.
