On Wednesday the DJIA took an 800 plus point beating. On Thursday, another 500 points were shed. At the same time, the mood of real estate buyers has darkened. Austrian Business Cycle Theory is proven right again.

President Trump is blaming the central bank, “No, I think the Fed is making a mistake. They’re so tight. I think Fed has gone crazy.” Just in case Chairman Powell was listening and cares, Trump repeated the “crazy” line over and over.

The Powell and Trump relationship doesn’t look to be anything like the Nixon-Arthur Burns bromance of the 1970’s. “I really disagree with what the Fed is doing, okay?’ the president said.

After the 2008 crash, the Federal Reserve provided an ocean, rather than a punch bowl, of liquidity and the elixir has gushed to the usual suspects: Wall Street, Washington D.C., Silicon Valley, and real estate. New Fed Chair Jerome Powell has, so far, proved to be made of sturdier stuff than predecessor Janet Yellen. Quantitative Easing (QE) has turned to Quantitative Tightening (QT). The central bank balance sheet is slowly shrinking. The Fed Funds rate has been raised from 7 to 195 basis points. The yield on the 10-year Treasury has more than doubled from it’s 2016 low.

Mark Thornton’s The Skyscraper Curse: And How Austrian Economists Predicted Every Major Economic Crisis of the Last Century couldn’t be more timely. As we slide from boom to bust, the thoughtful and curious will want answers. Thornton has them.

While Thornton’s work on skyscrapers has top billing, with his explanation of the various new technologies which make these ever-taller buildings possible being especially interesting, much of the book is a continuous stream of applying Austrian business cycle theory analysis to the many modern boom and bust episodes.

Towards the book’s end Thornton reiterates that “artificially low interest rates are not something that is obvious to the casual observer…” Many share the view of the president, who has lived on debt, “I like low interest rates.” However, low interest rates should reflect a high savings rate and low time preferences, when in fact, as the author explains, savings rates have fallen since Nixon took America off of what was left of the gold standard, and borrowing at all levels, individual, corporate and government, are setting all-time highs in order to maintain high levels of consumption.

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