Debate: Keynesian vs Austrian Economics and the Financial crisis

[theVOID]

http://www.youtube.com/watch?v=zM23TZxzO...re=related

What can I say, it's a fucking slaughter.

[Oldandeasilyconfused]

I found it fascinating that during the recent financial debacle, most countries immediately turned to basic Keynesian economics.

In a truly free market, the governments would not have interfered and the banks and companies such a GM would have been allowed to fail.

[theVOID]

All these nations were already doing Keynesian economics. They didn't suddenly switch models when the crisis hit, they did what was prescribed by the model they were already following.

And because the Governments did x therefore x was the right move? The fact that they followed the basic economic practice does not mean the practice it's self was the best thing to do. The following of Keynesian policies during the dot com and NASDAQ bubble is what caused the housing bubble and more Keynesian policies now are going to create an even bigger bubble in the future and/or cause the dollar to collapse in value as they are going to have to keep interest rates at extremely low levels which encourages more of the speculation, inflated value and risk-taking that caused the financial crisis.

Yeah they could have let GM fail which would have been the best thing to do, but instead they've given them billions of dollars for them to continue to produce a product for which the demand has diminished and in order to increase the demand they've coaxed the population into buying more cars (Because what the people need is even more cars...) by way of subsidies and trade-ins which means the population gets into more debt to make sure that this inefficient leviathan of a company can continue to make a profit to pay back the government.

Once GM has repaid the loan they owe the government nothing, but the population is still out of pocket because they are the one who have given GM the funds they need by buying cars they don't need - The govt is bullshitting people by saying that the loans will be recovered, they won't, the debt just get passed on to the consumers who have more interest and service fees to pay.

So yeah, the economy is going to look better in the short term and each time there is a bubble they can keep borrowing even more money to even it out - And they will have to keep borrowing because the US consumption is far higher than their production and savings, and that will only work until the debts get called in. The US has basically no chance of repaying the debt currently at 13.9 Trillion because their consumption is greater than their production and savings - Bailing out GM and the financial companies at the cost of more debt has only compounded the problem so the US can keep up their waste but it's still all going to end badly.

So not only has the Austrian model predicted the current collapse and the rise and fall of the housing bubble, but it has solid predictions for the future of this back and forth debtmongering and if/when all that happens there will be no justification for doubting that the Austrian system is a far more harmonious and stable model than the Keynesian one - If it doesn't happen it will be just as much reason to favour the Keynesian model.