One might have thought the Monetarists and Keynesians would have learned something from Japan. Instead, and in spite of debt to the tune of 230% of GDP, they came to the amazing conclusion “Japan did not do enough”.

Two Rules

  1. There is never enough debt to satisfy Keynesians.
  2. There is never enough fiat currency to satisfy Monetarists.

I confidently predict Japan will have a currency crisis before the US and when it happens I am equally confident Krugman and the Keynesians will make an excuse for it rather than admitting they were dead wrong.

via Mish’s Global Economic Trend Analysis: Premature Dollar Obituaries and Mainstream Economists’ Monetary Insanity; Keynes-Inspired Great Depression; Lessons Not Learned.

All of which was predicted long, long ago by Mises (originally in German, in 1940):

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of the voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved. – “Human Action” (p. 570) Ludwig von Mises, LvMI, 1998).

Interest rates are at rock bottom.  The Treasuries don’t want them raised, presumably because that will increase the costs of borrowing money in the future, and increase the cost of paying back the interest in existing debts. So we are unlikely to see a “voluntary abandonment of credit expansion” any time soon. Which leaves the alternative.

The whole Mish article is long but repays study. It includes long excerpts from various posts by Austrian economist professor Antal E. Fekete.