“We will not have any more crashes in our time.” John Maynard Keynes said this in a 1927 conversation with Felix Somary. As many people know, Ludwig Von Mises wrote in a letter to his wife that “A great crash is coming, and I don’t want my name in any way connected with it” just two years after Keynes made his claim. Mises was right of course. Six months after Mises wrote his letter, the stock market crashed and caused the great depression. Despite this lack of foresight on behalf of Keynes, academia gives his policies all the credit for bringing the world out of the Great Depression, even though the New Deal, if anything, prolonged the depression.
This is the arrogance of the Keynesians and the caution of the Austrians in a nutshell. But it seems history has repeated itself once again. In a conference in London, Yellen made the bold claim that we will probably never see another financial crisis “in our lifetimes,” all the while hinting that she believes mankind may never see another financial crisis again (she was cautious to say this, though).
Despite the collapses the world has frequently experienced through the ages under Keynesian economic policy, the Keynesians are still hell bent on the idea that they are right, and no calculation problem could inhibit the brilliance of their central planning. While Yellen shields herself, interest rates are still artificially low. The US Federal Government is approaching $20 trillion. The workforce participation rate is just above 50%. Savings is at an all time low. The economy, while growing, is riding an artificial wave of malinvestments. They will have to come down eventually. As Ludwig Von Mises said: “A great crash is coming.” I don’t know when it will come, but it is coming.