Plus, if I did possess the secrets to the future, I’d be making a fortune as a speculator, not telling you about it. This increase in economic activity will boost state and local tax revenue and end the already slowing cycle of public sector layoffs. The important thing to note, however, is that each month of recovery closes the gap between the natural rate and the rate the Federal Reserve is willing to set. Wicksell’s work leaves open the question of why the natural rate of interest might rise or fall, so it doesn’t make for much of a causal theory of recessions. The Fed can’t set the nominal interest below zero, and has steadfastly refused to engage in the variety of “unorthodox” measures that would push real rates lower, thus ensuring a long and painful recovery process.
– Just what did Ron Paul mean when he finished third in Iowa and said, "We are all Austrians now"? Republican candidates don't often celebrate European economic policies, but this is different, Matthew Yglesias writes in Slate. Those familiar with the inside baseball of libertarianism know that Paul is referring to two thinkers, Ludwig Von Mises and Murray Rothbard, whose idea of capitalism "is even more libertarian and anarchic than that espoused by many libertarians," writes Yglesias. "Austrian economics" rejects all government regulation and intervention to help the poor, and considers the tweaking of short-term interest rates a mistake that lures investors into doomed enterprises. Yglesias mounts a counter-argument, noting that the "Austrian" view doesn't explain the effectiveness of post-Great Depression fixes or the spending habits that fuel recessions. Yglesias sees an economic recovery around the corner, but if there isn't one, "these faddish views may gain more steam and perhaps we really all will be Austrians someday soon. But let’s hope not."