Bob Murphy is anti-market (monetarism)

Bob Murphy is anti-market (monetarism)
Bob Murphy has a comment on Market Monetarism on the Ludwig von Mises Institute website. Bob has been a fierce critic of Market Monetarism for some time and his views clearly deserves attention. I will not go into a detailed discussion of Bob’s comments, but one thing I have always found rather puzzling about the Austrian view of monetary policy is to what extent it is anti-market. Bob and other Austrians are claiming that the present US monetary policy is highly inflationary. However, that is not what the financial markets are saying. Bob Murphy’s big hero (and one of my big heroes as well) Murray Rothbard teaches us in Man, Economy and State that we can only observe people’s preference through their actions – what Rothbard terms demonstrated preferences. In a similarly way we can talk about a demonstrated expectations of monetary policy. Said, in another way market pricing is demonstrating to us whether monetary policy is loose or tight. If there really was a massive risk of US hyperinflation (as the Austrians basically are arguing) then US bond yields should explode and the dollar should collapse. Furthermore, if investors truly were afraid about inflation then they would certainly not hold dollars. However, investors have basically never hoarded dollars like no time before. Hence, market participants are telling us that the US is not facing hyperinflation, but rather disinflation. Either the markets are wrong or Bob Murphy’s analysis is wrong. I trust the markets…


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