Aristocratic tiger-riders

In the introduction to the third edition of FA von Hayek’s A Tiger by the Tail, Austrian economist Joseph Salerno observes:

Inflating aggregate money expenditure leads to a short-run increase in employment that causes an inappropriate distribution of resources whose inevitable correction ensures another depression. Such a correction can be postponed, but never obviated, only by repeatedly neutralizing relative price changes through accelerating inflation.

Those who deny Hayek’s analysis—as all contemporary mainstream macroeconomists and policymakers do—and promote ever-increasing spending as the panacea for our present crisis live in the simplistic Keynesian fantasy land from which scarcity of real resources has been banished and in which the scarcity of money and credit is the only constraint on economic activity. As Hayek pointed out, such people do not merit the name “economist”:

“I cannot help regarding the increasing concentration on short-run effects—which in this context amounts to the same thing as a concentration on purely monetary factors—not only as a serious and dangerous intellectual error, but as a betrayal of the main duty of the economist and a grave menace to our civilization.”

Of course, as we were reminded in 2008, and again in 2014, not only does the postponed correction always eventually arrive, but the nominally palliative measures become increasingly ineffective. The Left is not entirely wrong to focus on the evils of income and financial inequality, because today they are not the result of capitalism and free enterprise, but the neo-feudal largesse distributed by the federal government to the financial aristocracy through the central bank.

I had always wonder why the Ciceronian cycle predicted the rise of aristocracy rather than the conventional expectations of post-democratic dictatorship. But in light of the post-2008 crisis events, it makes a good deal more sense.