Out of the Blue Danube: Austrians Make a Comeback!

“The stone that smote the image became a huge mountain and filled the whole earth.” — Daniel 2:35

Finally, after years of economic turmoil, of boom and bust in the global economy, the great Austrian Friedrich von Hayek (1899-1992) is making an impact as the premier challenger of John Maynard Keynes and Keynesian policies of easy money, stimulus and big government. You may have even seen the Hayek-Keynes rap video, or read in The Economist about the “Hayekian risk” of wasted investment (also known as “malinvestment”) over the “Keynesian risk” of inadequate demand and weak growth in the United States, Europe and China.

For years, Hayek’s theories were ignored in an Age of Keynes, easy money and inflation. But now investors, business leaders and legislators are searching for answers and an explanation about the effect of asset bubbles in real estate, commodities and other assets. As Nobel Prize economist Gary Becker (University of Chicago) has said, “malinvestments do occur and are important in the economy.”

Hayek’s explanation of the business cycle and asset bubbles is generating a lot of interest these days… for investors, economists and government leaders.

As many of you know, I use the Austrian theory of the business cycle in Forecasts & Strategies to make investment decisions and to beat the market successfully (in seven out of the past eight years). Keeping interest rates artificially low for many years created a boom-bust cycle and asset bubbles in real estate, commodities and other investments. We have taken full advantage and recently have made large profits in financial stocks, real estate markets and energy investments.

Now, I have great news. Due to Hayek’s increasing popularity, Laissez Faire Books has just reprinted Hayek’s writings on the business cycle in a new book called “Hayek’s Triangles: Two Essays on the Business Cycle” — and I’ve written the introduction to bring them up to date.

“Hayek’s Triangles” includes Hayek’s two most famous long essays, “Prices and Production” and “Monetary Theory and the Trade Cycle.” Both were published in the 1930s during the height of Hayek’s debates with John Maynard Keynes. My introduction brings these two works up to date.

The new book “Hayek’s Triangles,” with my introduction, is now available as an e-book directly from Laissez Faire Books.

You can buy the e-book (or the printed version due out shortly) directly at www.lfb.org, or better yet, you can join their popular Laissez Faire Club and get the book for no extra charge.

The Laissez Faire Club has some incredible benefits — a new e-book coming out every Friday. For example, last week Laissez Faire Books released Doug Casey’s new book Totally Incorrect, and this Friday it will release “Hayek’s Triangles” with my introduction. As a member, you will also receive in the mail “Economics in One Library,” including Henry Hazlitt’s classic work “Economics in One Lesson” and Bastiat’s “The Law.” You will also become a member of an active social networking group with more than 4,000 members.

The price is only $10 a month or $99 per year. I just signed up myself. To learn more about the membership and potentially to sign up, click this link.

You Blew It! NRA Gun Solution in Schools?

In the wake of the tragic mass killing of kindergarteners earlier this month, the gun debate has become more intense. Gun critics want to ban “assault weapons,” while the gun advocates recommend posting armed guards to protect students and abolishing the “Gun Free School Acts” of 1990 and 1994.

Both responses focus on the effects, not the deep-rooted cause, of the problem of violence in America.

I liked Congressman Ron Paul’s response. “While I certainly agree that more guns equals less crime and that private gun ownership prevents many shootings, I don’t agree that conservatives and libertarians should view government legislation, especially at the federal level, as the solution to violence,” Paul wrote in a statement posted on his website. “Real change can happen only when we commit ourselves to rebuilding civil society in America, meaning a society based on family, religion, civic and social institutions, as well as peaceful cooperation through markets. We cannot reverse decades of moral and intellectual decline by snapping our fingers and passing laws.”

That’s exactly what I said in my pamphlet, “Persuasion vs. Force.” Here are some excerpts:

“The triumph of persuasion over force is the sign of a civilized society.”

“Too often legislators resort to the force of law rather than the power of persuasion to solve a problem in society. They are too quick to pass another statute or regulation in an effort to suppress the effects of a deep-rooted problem in society rather than seeking to recognize and deal with the real cause of the problem, which may require parents, teachers, pastors, and community leaders to convince people to change their ways.”

“Crime is another issue plaguing this country. We can solve the murder and crime problem in this country, they reason, simply by passing a law taking away the weapons of murder. No guns, no killings. Simple, right? Yet they only change the outward symptoms, while showing little interest in finding ways to discourage a person from becoming criminal or violent in the first place.”

To read the entire pamphlet, go here.

To read my e-letter from last week, please click here. I also invite you to comment about my column in the space provided below.

Good investing, AEIOU,

Mark Skousen
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