Austrian Enginomics

CLICK HERE for CURRENT Articles

Post a Blog here...!

Austrian Economic Theory blended with engineering logic yields:  "Austrian Enginomics"...

Austrian economic theory has a rich history dating back over 100 years.  The principle Austrian Web Site in the US is www.mises.org.

Ludwig Von Mises was a brilliant Austrian known locally for his work in sociology.  However, he dramatically advanced the Austrian economic theory worldwide in his book, Human Action released in 1949.  Bohm-Bawerk, Menger, Wieser, Hayek, Rothbard, Kirtzner, and Lachmann were other Austrian notables....

I am most fascinated with the Austrian Business Cycle theory.  The logic is in sharp contrast to Keynesian, Monetarist, or even Classical theory.  Austrians believe that significant economic booms and busts are caused by central bank monetary policy.  The booms are initiated, nurtured, and exacerbated by artificially suppressing interest rates and conducting "easy monetary policy" operations.  The greater the boom, the greater the bust....  Needless to say, since 1995 we have experienced the greatest boom (and bubble) in US history, which is today (2011) in its infancy of unwinding.

In contrast to this, for example, Keynes believed that an economic bust can be caused by "animal instincts" (i.e. clearly not the cause of government), then fiscal and monetary government intervention must follow to mitigate the severity of the bust and guide the economy back to normalcy.

Over the past seven years I have used my engineering logic to develop applicable metrics.  I believe there are two fundamental metrics that indicate the magnitude of the economic extremes we experience today:

1)  The ratio of labor resources employed by "market unjustified" business enterprises relative to those that are "market justified".

Note:  A "market unjustified" enterprise is simply a business that would not be profitable if interest rates were modeled @ a natural market rate.  Austrians use terms including malinvestment and misallocation of resources to describe such businesses and their activities.
     

2)  Overvaluation of equities, bonds, and real estate, again, relative to "natural interest rate" market conditions.

In Human Action Ludwig von Mises wrote:

"An increase in the quantity of money or fiduciary media is an indispensable condition of the emergence of a boom.  The recurrence of boom periods, followed by periods of depression, is the unavoidable outcome of repeated attempts to lower the gross market rate of interest by means of credit expansion.  There is no means of avoiding the final collapse of a boom brought about by credit expansion.  The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."  Ludwig von Mises; Human Action: A treatise on Economics, Regnery, 1966, pg. 572.

You will find numerous articles within this site that are unsettling.  My purpose is to challenge the "status quo" of prevailing economic thought, and...

• guide us back to a gold-based monetary standard,
• encourage a Federal balanced budget amendment,
• discard all illusory Federal trust funds (e.g. Social Security, Medicare, etc.) and manage them as wealth transfer programs budgeted annually, and
• preserve the Republic.