Nigel Farage vs Keynesians

Austrian Economics Would Save Europe: Nigel Farage Debunks Keynesians:

From his speeches, I sense Nigel Farage is an Austrian. For non-economists, this means a student of the Austrian School of Economics. This branch of economic philosophy has elucidated the correct cause of the boom-bust cycle in the first place: malinvestment, central banks, and fractional reserve banking. It is a widely dissed school among the economic establishment, yet its devotees have a funny habit of predicting the collapse of economic bubbles long before anyone else.

The Austrian School claims that the business cycle, long thought by Keynesians to be an unavoidable anomaly in the firmament of the economy, is created by the activity of banking cartels like the Federal Reserve, the Bank of England, and the ECB. For the last ten years, for example, in the wake of the Dot Com bubble, Fed Chairman Alan Greenspan kept interest rates at near zero. This sent out a green light to the economy to take out cheap mortgages, resulting in an inflating Housing Bubble. The Housing Bubble is an example of malinvestment, where capital flows into an unprofitable area of the economy.

Recession is a neccessary consequence of this cycle, because the malinvestment must work its way out of the system for the economy to regain economic health. This means that the bad banks must be allowed to collapse and new ones must rise up to take their place. Yet it is clear that policy makers in the Troika are determined to contravene these natural laws by keeping the cancerous cells inside the body.

The proof of the pudding, as they say, is in the eating. Iceland, which didn't put a single penny into their bad banks in 2008, is already back to growth. It is sad that the only thing which would solve our economy is exactly what politicians are most unwilling to do: nothing.