I have since been directed to an interview with another Austrian economist (this one also a British citizen) that - aside from the poor quality and the stilted voices - could have been recorded yesterday.
In it, Nobel laureate Prof. Friedrich von Hayek explains that inflation is always the result of government action, is the great evil against which we need to battle, and that efforts to intervene to prevent recessions that follow from periods of government-led inflation are doomed to failure.
The part of the inteview from 14.00 minutes to 16.50 minutes is particuarly chilling!
The following is a summary of what he says (I have slightly augmented it with my own understanding of his take on economics, though where possible I have enclosed these additions in square brackets):
- Germany out-performed the UK in the three decades after WWII because the German trades unionists remembered that inflation is the enemy of the working man;
- If people do not recognise the danger of inflation they will continue to believe that it can be used as a short-term solution to economic problems, as a result of which inflation will continue to wreak havoc upon the economy;
- Unemployment results from inflation, which encourages the misdirection of labour [because easy money is made available to enterprises that would not, under normal conditions, be viable, allowing them to offer higher wages than would be possible if the easy money had not been thrown into the system by Government], so it is wrong to suggest that in the long term one needs to tolerate unemployment to curb inflation;
- Curbing inflation will cause short-term unemployment, but this need only last a year or so [before the market re-asserts itself and labour is employed once again];
- As Jeffrey Tucker notes, the “hilariously naive and idiotic” line of questioning demonstrates how “people really believe that policy makers can manipulate the economy like a machine, trading off unemployment for inflation and back again, with no trouble”
- Non-compulsory planning will have no effect and so can do no harm [or, indeed, any good];
- “Stopping the printing presses” is a euphemism as the real cause of inflation is credit expansion rather than the actual printing of hard money;
- “All inflation is ultimately the problem of activities which government determines and can control. And all inflations have been stopped in the past by the governments stopping creating money or preventing the central bank from creating more money” [thus putting the lie to the government’s suggestion that inflation is caused by outside factors such as rises in the cost of commodities];
- A tax cut will not work to stimulate the economy because deficiency of aggregate demand is not the problem. Rather, the problem is that the boom and employment that has been created by the previous inflation can only be sustained by further inflation [which, if perpetuated, would lead to hyper-inflation and ultimately a crisis];
- If government continues to inflate to sustain the boom it may have to try to ameliorate the effects by imposing price controls which will lead to the imposition of a planned economy [i.e. socialism];
- Political freedom exists hand-in-hand with economic freedom and the former cannot exist without the latter;
- The power of labour unions and corporations does not lead to inflation unless that power is used to encourage inflationary policies;
- Wages/Prices/Incomes policy is utterly ineffective except as a means of managing in the very short term the period of deflation/restoration;Not all problems are solvable in the short-term and trying to do so may cause more harm than good;
- Equities remain a good investment in the long term;
- “Inflation is like over-eating and indigestion. Over-eating is very pleasant; so is inflation. Indigestion comes only afterwards and so people do not see the connection”;
- Economists are intellectually attracted to the concept of a system that they can control and therefore are instinctively opposed to free markets and non-intervention;
- Continued government-induced inflation and subsequent intervention by government will inevitably destroy capitalism [as Karl Marx predicted and hoped for].