Austrian Test

Monday, Mar 16, 2009

Generally speaking, if Bernanke had done what he just did with the money supply in terms of monetary base, you would think that there should have been massive price inflation already. And yet there obviously hasn't been, and so how do I explain that? I say, "Well, gee that is kind of surprising to me. I would have thought prices would have been rising more quickly than they have the last few months." But I just say, "Well, it must be because people are so panicked that they're hoarding money like crazy and they're offsetting all the money that Bernanke is pumping into the system."

But I've said to people on my blog and elsewhere that if we don't start having a serious uptick in price inflation in 2009 that I will publicly admit that I'm misdiagnosing what's going on here and I don't understand how the Fed works. Because, I am surprised that he's pumping this much money and it hasn't shown up more in the official price figures.

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It is true that if you're gonna arm yourself with a toolkit of deductive propositions that you don't ever test, because by their very nature you can't test them, you have to occasionally ask yourself, "Well, gee, maybe these tautologies aren't helping me get by in the real world?" Occasionally, do a sort of idiot-check. Like I say, for myself, if inflation doesn't really kick in during 2009, then I really need to go back to the drawing board and re-evaluate how I look at these things.

Antiwar Radio: Robert Murphy, Austrian Economist, http://awr.dissentradio.com/090306_murphy.mp3.