459: Richard Duncan on What Austrian Economists are Afraid to Tell You

Today, we’re diving into a topic that’s sure to ruffle some feathers, particularly if you’re a fan of Austrian economics.

Look, I get it. Austrian economists have an appealing story. It’s neat, it’s clean. You save money, you balance budgets, and the free market solves everything. It’s almost comforting, in a nostalgic way, like when your grandparents tell you how they walked uphill both ways to school. 

But while simple and neat, it just doesn’t reflect the reality we live in today? It’s like using a paper map in the age of GPS—sure, it worked back then, but today, we’re navigating a completely different landscape.

In 2008, Lehman Brothers collapsed and the markets were in freefall. It felt like the entire financial system was about to implode. Now, according to Austrian economics, we should’ve let the whole thing crash and burn. 

They argue that economic downturns are necessary to “cleanse” the system, allowing inefficient businesses to fail and making way for more robust ones. 

They argue that the economy should function like a forest fire, clearing out the old and dead so new growth can emerge. But what if that fire had spread to every corner of the world economy and left nothing but ashes?

Here’s the thing: in 2008, the world didn’t allow the fire to spread. The central banks, particularly the Federal Reserve, stepped in with unprecedented measures—quantitative easing, zero interest rates, massive injections of liquidity. 

Essentially, they flooded the economy with money to stop the bleeding. If you ask an Austrian economist, this is akin to sinning against the laws of nature. But here’s the kicker: it worked. The world didn’t plunge into a Great Depression, and we’re all still here today because of those “unnatural” interventions. 

Fast forward to the COVID-19 pandemic. Governments around the world shut down economies, businesses shuttered, and millions of people were suddenly out of work. Once again, the central banks and governments unleashed trillions of dollars in stimulus to keep things afloat. According to Austrian economics, this was another sin—a violation of the sacred tenets of free markets. But what was the alternative? A global economic collapse?

Now, don’t get me wrong—printing money and keeping interest rates low indefinitely isn’t a free lunch. It comes with consequences, like inflation, which we have certainly felt over the past two years. But the point is, we live in a world where pure economic theories rarely align with reality. 

The global economy is far too interconnected, too complex, and too fragile to leave it to the “invisible hand” without intervention. Sometimes, we need a heavy hand to guide the way, and Austrian economists often seem to be living in a world where that hand doesn’t exist.

Believe me, I do believe we need to a lot better when it comes to being fiscally responsible and not racking of huge amounts of debt. But the idea that Austrian economics can solve the issues of our day is just a fairytale.

And I know those of you who are followers of Peter Schiff are going to send me hate mail so I might as well turn over my rant to economist Richard Duncan, which we will do right after these messages. 

Richard feels strongly about these topics so this is less of an interview than it is a lecture. Hope you enjoy it!

08:03 What is an Austrain Economist?

14:04 Back to the Gold Standard?

23:04 What’s Going On in the Economy Today?

30:35 U.S. Economy in the Next Few Years