Nothing Ever Happens

by
Joshua Schubert
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We are stuck in the middle of the road, far away from full socialism or the unhampered market.

On Friday August 2, due to a disappointing jobs report, there was a large sell off on the stock market. After understanding Austrian Business Cycle Theory (ABCT) and the structural fragility the Federal Reserve creates in the production structure, my temptation upon seeing such a large swing in the market is to say, “Finally, I am vindicated! The boom-bust cycle has shown itself once more and we are now entering the bust.” Of course, as Mises has shown, praxeological theories are not proven or disproven by empirical facts. Echoing Hoppe, experience cannot beat logic.

Per Investopedia,

The Nasdaq Composite and S&P 500 fell 2.4% and 1.8%, respectively, while the Dow Jones Industrial Average slid 1.5%. Each of the major indexes finished lower for the week, with the Dow snapping a four-week winning streak while the Nasdaq and S&P 500 have now posted three straight weekly declines. The Nasdaq has slipped into a technical correction, as it’s 10% below its July 10 record close.

On Monday August 5, five of the largest investment firms—Charles Schwab, Fidelity, Vanguard, TD Ameritrade, and Robinhood—experienced critical IT outages. Additionally, in the previous two weeks over 2,000 flights were canceled due to IT outages. Once the outages were remedied, the S&P returned to “business as usual.” The succession of events that occurred, contrary to what one might expect, did not lead to anything spiraling out of control. In other words, nothing has happened.

Anyone who is familiar with Austrian monetary economics knows that, even with today’s seemingly-high interest rates, all that is occurring is a disinflation—a lowering of the rate at which money is created through credit expansion at the Federal Reserve. Every new dollar is yielding the Federal Reserve, the federal government, and their cronies the seigniorage benefit of redistribution of real resources, as well as fueling malinvestment in their preferred ventures over those of the consumers and their natural preference to save.

Of course, the praxeological laws of the business cycle are derived from pure theory, while also observable (with theory in mind) in the empirical boom and bust. Perhaps while things seem stable in the near-term relative to what is seen, there may be huge unseen economic decline relative to what would have been the case without the credit expansion. High interest rates now are still low relative to the unseen Wicksellian natural interest rate that would occur without credit expansion.

Perhaps it is the case that the combination of Federal Reserve policy, alongside the FDIC protection against bank runs, that the monetary system has secured a stable decline for our civilization. On the margin we will be made poorer, but never suddenly all at once. Nor will the forces of good strip the Federal Reserve of its power. Their action to restore monetary sanity may be already priced in and engineered away to irrelevance by the powers that be. Sometimes it really does seem like nothing ever happens.

As Zachary Yost noted on the War, Economy, and State podcast, we are not living in the end of history. History marches onward and we are not inevitably in a stable equilibrium of the social-democratic millennium. To say that “nothing ever happens” is to deny the action axiom itself. Men now are acting on ideas in order to achieve ends and we will see how what happens now sets the stage for what happens next. There is the burgeoning potential for the current elite to be replaced by a counter-elite that consciously recognizes the importance of the natural order of family, property, church, and commerce. In my hometown, the former and potentially-future president narrowly avoided an assassination attempt by a slight turn of the head and the divine providence of God. To say that nothing ever happens is a bald-faced lie to anyone with discernment.