Robert P. Murphy: We've "Been Warning for Years"
By David Henderson
Austrian economist Robert P. Murphy writes:
As shocking as these developments [drops in stock prices and increased volatility] may be to some analysts, those versed in the writings of economist Ludwig von Mises have been warning for years that the Federal Reserve was setting us up for another crash.
The key words in this quote are “have been warning for years.”
Let’s say that you warn people that a price will fall. It keeps rising. Finally, years after your warning, the price falls. But it falls to a level well above the level it was at when you made your warning. How useful, then, was your warning?
I think not very.
Notice that the closing index for the S&P 500, a better measure than the Dow-Jones, which measures only 30 stock prices, was 1104.49 at the end of February 2010. As I write this, it’s at about 1,890. Which means it has fallen to about the level it was at–in April 2014.
Question for Bob Murphy and other proponents of the Austrian Business Cycle Theory: is there any evidence conceivable that, if you believed it, would convince you that your theory is wrong?