My letter to the WSJ re: Austrians understand why there is a commodity glut

Re: Glut of Capital and Labor Challenge Policy Makers

Dear Sirs:

The worldwide commodity glut is not a surprise to Austrian school economists. It is a wonderful example of the adverse consequences of monetary repression to drive the interest rate below the natural rate. Longer term projects, such as expansion of mineral extraction, appear to become profitable. But such is not the case for the simple reason that printing money does not represent an increase in real, saved resources. Eventually it will be clear that capital has been wasted, what Austrian school economists call "malinvested". No amount of further monetary repression can cure this problem, although I am certain that the Keynesian school economists in charge of central banks and governments all over the world will give it a good try. Akin to bleeding the patient until he recovers, we may not survive this Keynesian medicine.