There are many thoughts and policies floating around in the Trump administration that could lead to a financial depression. The disturbing issue for me is that the Austrian Economists who are influencing the administration do not believe that a financial depression is that big of a deal.

After this issue is discussed, the concept of the strong dollar under Trump has to be addressed. The dollar is the reserve currency, and there is a tight and potentially dangerous monetary regime regarding the use of it as the reserve. We can take away interesting concepts from Jeffrey P. Snider, Scott Sumner and Gary Shilling.

As for financial depressions, it is true that Austrians point to the Depression of 1921 as an example of how quick you can recover from a real Depression. But there has to be enough credit in society to bounce off a financial depression like that one. Retooling of industry and credit availability caused it to be short lived. But financial depressions that are credit based can go on for years. You can call them Great Recessions if they aren’t judged to be quite as bad as the Great Depression of the 1930’s.

Financial health does not bounce back very fast in a credit based downturn. We are experiencing painfully slow growth, which is not a normal reaction to recoveries but is the new normal of recovery from the Great Recession of 2009-2009. 

And it isn’t like the Fed fears taking the economy down either. They don’t claim to be Austrian economists, but they sure act like they are in big downturns, with their mass liquidations and money supply problems. I know they can’t tolerate inflation anymore because of the new normal. But can they reflate? I don’t think so. 

The Austrians believe the money supply should be tighter and the dollar should be stronger. People should read articles like we see written by Jeffrey P. Snider to see tight money was the issue in the Great Recession and in the Great Depression of the 1930’s. And it is the issue today with a weak world economy.