(L40) Government Intervention in The United States

1.) Explain the basics of the Austrian theory of the business cycle. What is the difference, in terms of consequences, between lower interest rates that result from the saving choices of individuals, and lower interest rates that are achieved artificially, by a government-established central bank?

The Austrian theory of the business cycle basically dictates that in a free market, there is communication between the consumer and the producer which is translated through interest rates. As long as interest rates are not interfered with, they will read correctly to producers and allow them to meet the needs of their consumers reliably. However, when interest rates are interfered with and pushed down artificially by the central bank, there is no longer clear communication between producers and consumers. This lack of economic coordination creates conflict, and makes society poorer because labor and physical resources have been misallocated. The results of government intervention and false interest rates are recession and depression plagued upon the people.

2.) What are some of the pitfalls of industrial policy?

Industrial policy is what it is called when the government favors certain industries through subsidies, cheap loans, and other specific assistances. One of the biggest downfalls of industrial policy is the fact that it diminishes incentive within the favored business firms to be entrepreneurial. Another large issue with industrial policy is that it eliminates competition to a certain degree, and makes it more difficult for newer firms to compete against pre-established, government supported firms.

Economic Evaluation 2015 (L155)


According to investment and financial educators Mike Maloney and Peter Schiff, a huge financial crisis is in the making. Through pinpointing similarities in trends from the 2008 financial crisis and information today (2015), they have built quite a strong case for the instability of the United States’ economy. A big issue that they discuss in their video Charts The Government Doesn’t Want You To See: Schiff & Maloney Reveal The Truth, is the fact that people, it seems, are no longer investing! (At least not as much as they typically would/should be.) People not buying new goods is causing the value of those goods (as a whole) to drop. This is reflected in multiple charts on the FRED website; including the Value of Manufacturers’ New Orders for Consumer Goods Industries. A current drop in value, much like the drop appearing during the 2008 financial crisis is clearly visible. (Charts).



Another worrisome connection in financial trends is found in the NACM credit application rejections numbers; in 2015 the United States saw their biggest spike in credit application rejections in recorded history. In this case, 2015’s numbers are not only similar to that of 2008’s, but the rejection spikes actually exceed the previous largest spike on record (which occurred in 2008). According to Maloney and Schiff, these could be the warning signs of a crash much, much worse than that of 2008 approaching. (Charts).


(US Inflation Calculator)

Inflation, being just a fancy word for the devaluation of the dollar, (or the increase of prices), is representative of the economy as a whole. As inflation rises, your dollar is able to purchase a smaller and smaller amount of any given good. Already in 2015 the United States’ inflation rates have outdone those of 2008. (Although it seems that inflation rates are the lowest in times of recession, it is more likely than not that things have been planned to look that way, in order to shield inflation from economic blame. Factually, it does not make sense that this could be the case.) Also equally suspicious, the United States Bureau of Labor Statistic’s unemployment rates reflect lower rates in times of recession too. 2015’s records closely match those of 2008, with only a difference of %0.1 for the month of May. (In May of 2008, the employment rate was 5.4%; in May of 2015 the unemployment rate was 5.5%.) (Bureau of Labor Statistics.) However, with unemployment rates being shown at their lowest right before (and during the beginning of) recessions, wouldn’t that mean that it was not really a recession? It is obvious here, that with all the changing standards of calculation, as well as interest rates and inflation, records do not necessarily accurately reflect the economy. (Fake government numbers covering up real government mistakes? The American people have not ever witnessed any behavior like that before…) In the words of a good friend and teacher, “the books are being cooked”.

This report has honestly confused me a lot more than it has clarified things for me. I understand the snags in our economy as of now, and I understand who is to blame. I do not understand however, how it is that the majority of Americans are blind to these issues. These numbers and books all mean nothing if they aren’t filled by credible sources; do your research folks, it can be a deceptive world out there, but the truth really is all around us.


Charts The Government Doesn’t Want You To See: Schiff & Maloney Reveal The Truth. Perf. Mike Maloney and Peter Schiff. Youtube, 2 June 2015. Web. 6 June 2015. <https://www.youtube.com/watch?v=Q62atnTQldI&feature=youtu.be&gt;.

US. Bureau of the Census, Value of Manufacturers’ New Orders for Consumer Goods Industries [ACOGNO], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/ACOGNO/, June 11, 2015.

“US Inflation Calculator.” US Inflation Calculator. COINNEWS MEDIA GROUP, n.d. Web. 15 June 2015. <http://www.usinflationcalculator.com/inflation/current-inflation-rates/&gt;.

“Bureau of Labor Statistics.” United States Department of Labor. Us Bureau of Labor Statistics, n.d. Web. 15 June 2015. <http://data.bls.gov/pdq/SurveyOutputServlet&gt;.