Austrian economics is also the only free-market orientated school of thought drawing full attention to the deficiencies of the global policy response since 2007–2008. Central banks and governments around the world have mitigated the impact of the crisis on output and employment, providing more than $10 trillion dollars of financial support to prevent bank failures, cutting short-term interest rates for all the major currencies close to zero and engaging in a sustained and aggressive fiscal expansion that has more than doubled the ratio of public sector debt to GDP.
These measures may have been effective short-term palliatives, but they have done little to deal with underlying causes. While substantial increases in regulatory capital requirements and a wide range of other regulations have reduced tax-payer exposure to banking risks, investors have been left in little doubt that they will be protected once again should the entire financial system once again be threatened. The resumption of growth in the advanced economies is based as before on credit creation and maturity mismatch. The mispricing of assets and misallocations of capital evident before the crisis have continued, in many cases becoming even more marked. Economic expansion has been much stronger than was generally expected in the 18 months following the collapse of Lehman brothers, but this recovery has not been strong enough to allow a winding down of fiscal expansion. A policy of temporary ‘pump priming’ has turned into a policy of permanent and unsustainable fiscal deficits.
—Alistair Milne, “Cryptocurrencies from an Austrian Perspective,” in Banking and Monetary Policy from the Perspective of Austrian Economics, ed. Annette Godart-van der Kroon and Patrik Vonlanthen (Cham, CH: Springer International Publishing, 2018), 223-224.
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