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Comment by aidenn0 | Hacker News Reader

I am not an economist, but I thought that both Austrians and Keynsians agree that fiat currency with steady, moderate inflation will increase economic activity versus a steady deflationary currency.

The disagreement is whether or not artificially generating economic activity by inducing inflation is a good thing or a bad thing.

The Austrians think that the increased economic activity consists largely of malinvestments due to artificially cheap credit, which will cause a short-term boom, followed by a subsequent crash.

The Keynsian view is that you can ease out of the boom without a crash, and that the markets will take too long to equilibrate without such an artificial increase in monetary supply ("In the long term, we're all dead").

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I am also not an economist, but I'd like to frame your Austrian/Keynesian comparison with another one:

Underinvestment (Austrian): There is less investment due to risk being less preferable to steady savings. Example: I won't risk 1 million dollars today on a risky investment if my 1 million dollars next year will be worth more.

Overinvestment (Keynesian): These is over investment due to inflation outpacing savings. People are forced to invest in risky ventures, as at least there is a chance you can earn money as opposed to losing money over time. Example: I risk my 1 million dollars today on a risky (subjective, I'm referring to -10% to 10% gains) investment and if not, will definitely lose 5 percent of that money.

I'd love to hear your thoughts on the matter. Personally, I see strengths in both styles of economic policy, but believe that in our current economical climate, we are overinvesting and through central planning, mis-investing by stimulating the top echelon of investors who simply buy property (real estate asset prices go up), businesses (mergers & acquisitions), and commodities that hold their value. Look at the rise in value of fine art over the last 6 years. These to me, are signs of a bubble.

Another argument from the Austrian school is that even if a theoretical impartial Keynsian could manage the economy better than the free-market, the reality is that such an impartial entity doesn't exist, and the more centralized the power over the economy is, the more prone it is to corruption.

That is to say the wealthy will ensure that the central banks make policy decisions that benefit them at the expense of others.

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