The Quarterly Jurnal f Austrian Ecnmics 15, N. 1 (2012)
xel Leijnhufvud, an ecnmist knwn internatinally fr hiswrk n the literature f Jhn Maynard Keynes and Keynes
ianism (Leijnhufvud, 1968), has suested that the subprime crisisf 2008 mre clsely ts the Austrian business cycle thery f Ludwivn Mises and Friedrich Hayek, than the Keynesian framewrk.
In this paper, we prvide evidence fr that claim. Mre specif
ically, we assert the fllwin:1) that the subprime crisis, r the “husin-bubble” is nt anislated incident. Rather, it is ne f a number f related eventswhse riins can be fund in the mnetary plicy that the Fed hasadpted at least since 1980;2) that when we cncentrate n the mst recent cycle, (Kruman,2002), we nd that the Fed intentinally replaced the dt-cm bubble with a husin bubble, expandin the mney supply at arate f 10 percent (measured by M2), and reducin real interestrates t lw fr t ln;3) that greenspan-Bernanke, n behalf f the Fed, asserted,withut fundatin and cntrary t the evidence, that the crisiswas nt rted in the plitics f the institutin they lead, but wasrather a lbal phenmenn, a “savins lut,” which reduced theln-term interest rate naturally;4) that the ppular explanatin that blames the dereulatinf markets as a cause f the crisis, is als unfunded. In fact, the bankin system is ne f the mst reulated sectrs in the U.S.ecnmy. It was, in fact, the excessive reulatin f the system,which channeled the easy mney plicy f the Fed int real estate,thus distrtin the physical capital structure f the ecnmy;5) that the bm we have seen in the husin sectr started between 2001 and 2004, and culd nly have persisted as ln asthe Fed was able and willin t keep interest rates lw, a plicywhich risks the precipitatin f eneral price inatin. In theface f this threat, the Fed nally raised interest rates, bwin tmarket pressure as the demand fr lanable funds increased. This
After prvidin a summary f his understandin f the current crisis Leijnhufvud(2008) arues: “This, f curse, des nt make a Keynesian stry. It is rather avariatin n the Austrian verinvestment theme.”