An Austrian Economist reads the news

As fellow students are very well aware of, waking up is not the hardest part of starting day; getting out of that bed actually is. This unfortunate morning I spend little over an hour reading the news. Not snapchatting like my flatmates would do, not mindless facebooking. Doesn't seem too bad, right?

Turned out, reading the news from an Austrian's perspective (here's a quick overview to how we approach Economics) could be detrimental to your mental health. Gosh. Here's a brief review of today's catch. Apologies for Sweden-biased.

ECB Considers Negative Interest rate

A Swedish article regarding a piece of news from last week. (Eng:Bloomberg, Swe: SvD).

Right. The Keynesian conviction of controlling and governing the economy through the almighty power of injecting/extracting money from the economy with by means of Interest Rate doesn't seem to be enough. Negative interest rate essentially means that someone is paying you to take up a loan; not only would the European Central Bank be giving away loans for free, now they're supposed to pay others for taking up loan. The Keynesians are becomming restless. Their front figure Paul Krugman occationally calls for extended measures, such as negative interest rates etc. Essentially, the Keynesians believe in AGGREGATE SPENDING, and during recessions everything needs to be done in order to increase such spending. Whatever that might be. 

Problem for an Austrian Economist is that we use the theory of Business Cycle , that is up- and downturns in the economy are NOT an inherent feature of the free market; they're created by central banks through increased money supply. Low interest rates makes investments (predominately those in a far off future) seem profitable while they weren't at a higher interest rate. This creates a whole lot of additional investments right now, which is exactly what the Keynesians are looking for. Problem is, once interest rates are stabilised or normalised, one after another investors will realized that investments made actually don't pay off. All they've done is destroying resources in what we like to call malinvestments. 

So, when I read "Negative Interest Rates", that is BELOW 0 interest rates, this is how I feel:

Prominent Swedish Journalist: "Are European Politicians Stupid?"
That's a claim I'm not going to dispute, but for completely opposite reasons. Andreas Cervenka accusted the EU politicians in favor of austerity measures stupid yet again referring to Krugman. Why? They reduce spending while in a recession, because of too high national debts. 

Yet again the Austrian asks themselves, WHY have these countries run up such debt? In the case of Greece, Spain and Italy yet again it comes back to the Business Cycle; way too low interest rates gave birth to completely brainless investments, that eventually unfolded themselves (and banks, governments etc took over such debts, spend taxpayers money to save bad investments, not solving any problems, and additionally multiply government debt). 

*sigh*

Politics should be STATE-FUNDED!

Steve Richards in The Guardian says political campaigns are threatened unless they're state-funded. 

Really. 

Everytime I see "X should be State-funded", "Taxpayer should pay for Y", I slowly want to strangle myself. A simple 'no' would suffice; If any state at all is justified, its tasks involve upholding private property rights, possibly a military force or court system. Except for that, there's no justifcation.

But from an Austrian perspective, this is quite useless on the ground that taxes raised for whatever purpose takes away resources that could and would have been employed elsewhere. That is, such mearues restricts the investments that could have been made by those individuals, thus moving resources from private to public. Not exactly beneficial for an economic system, moving money from productive to unproductive sectors such as political campaigns.   

Housing Market!

Le Grand Finalé!

Swedish socialist got media attention with their article of "how to solve the housing crisis" in one of the largest nespapers. Just like the debates had throughout the UK, Rent Control, Collective Measures and State Intervention are the natural solutions at the core of such reasoning. Let's all blame the market and those filthy capitalists for what they've done!

Problem is, blame is to be put elsewhere. As always, the socialists forget a lot of things, particularly what is causing a housing shortage/crisis. 2 major lines of answers here; 

1) by restricting rent levels, profits gained from letting your property is reduced, necessarily resulting in less capital willing to construct such houses/less amount of people willing to let some of their properties. They can simply find better use for those resources than let them for housing. So, by restricting rent levels you'll have LESS homes available for letting.

2) state interventions, building permits, restrictions and bureuaucracy involves costs in terms of money, time and opportunity costs. The process of actually constructing a house, not to mention an entire complex of apartments, is ridiculous. This is mainly in regards to the Swedish situation, but from what I've learned it applies fairly well in the UK too.

So, calling for more State Interventions to solve the problems caused by the State's last Interventions?   I've heard that before...   Brilliant reasoning.

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Sometimes I think I should watch a cartoon, draw a painting or simply ignore these awful ideas put forward in the media or everyday life. They never cease to surprice me.