%0 Journal Article
%T Neo-Austrian Views of the Global Financial Crisis and Its Pre-Corona Aftermath
%A Karl Farmer
%A Laurie Conway
%J Modern Economy
%P 712-763
%@ 2152-7261
%D 2021
%I Scientific Research Publishing
%R 10.4236/me.2021.124036
%X In the aftermath of the Global Financial Crisis
(GFC) 2007/2008 the sales of </span><span><a href=\"#ref43\"><span style=\"font-family:Verdana;\">Hayek¡¯s (1944)</span></a></span><span style=\"font-family:&quot;\"><span style=\"font-family:Verdana;\"> Road to Serfdom quadrupled, a clear indication of renewed public
interest in the views of (neo-) Austrian economists on macro-economic crises,
especially financial crises. It is also true that several economists associated
with the Austrian school, or those using neo-Austrian insights, correctly
predicted the U.S. housing bubble and the subsequent GFC, apparently, a clear
vindication of (neo-) Austrian cycle theory </span><a href=\"#ref55\"><span style=\"font-family:Verdana;\">(</span></a></span><span><a href=\"#ref55\"><span style=\"font-family:Verdana;\">Hunter,
2018</span></a></span><span style=\"font-family:&quot;\"><a href=\"#ref55\"><span style=\"font-family:Verdana;\">)</span></a><span style=\"font-family:Verdana;\">. More surprising is that even relatively fierce
opponents of neo-Austrian macro-theory have meanwhile begun to accept some
Austrian insights. We thus ought to ask, what are the basic tenets of the
Austrian Business Cycle Theory (ABCT) and how did it enable some economists to
correctly predict the U.S. subprime crisis and its aftermath? In contrast, it
is also true that mainstream macro-economists, although struggling heavily to
come up with a suitable theoretical explanation of the GFC, neither accept the
neo-Austrian explanation of crises, nor its policy implications. Therefore, we
also need to ask why mainstream economists dismiss ABCT. Is it the alleged
neo-Austrian bias towards the supremacy of an unfettered market economy which
is rejected by the mainstream, or is it rather the lack of correspondence
between ABCT and the stylized facts of business cycles, such as the positive
correlation between consumption and investment? We also need to ascertain to
what extent the basic Mises-Hayek cycle theory can be applied to an explanation
of the U.S. subprime crisis and the GFC? For example, the neo-Austrian
economist </span></span><span><a href=\"#ref80\"><span style=\"font-family:Verdana;\">Salerno (2012: p. 41</span></a></span><span style=\"font-family:&quot;\"><a href=\"#ref80\"><span style=\"font-family:Verdana;\">)</span></a><span style=\"font-family:Verdana;\"> has
stated that the unprecedented monetary inventions by the U.S. Federal Reserve
(Fed) and the enormous government deficits run by U.S. administrations since
the Great Recession (GR) must at some point lead to a 1970s-style
%K Financial Crisis
%K Neo-Austrian Economics
%K Austrian Business Cycle Theory
%K Unconventional Monetary Policy
%K Deflation
%U http://www.scirp.org/journal/PaperInformation.aspx?PaperID=108410