Well that didn’t last long.
Yesterday when Fox News business guy Neil Cavuto asked President George Bush about the sub-prime mortgage market meltdown, the president replied that the US was “suffering from an excess of capital, I mean, liquidity.”
But the president sounded a very different note when he was asked a similar question just moments ago in the press conference now underway at the White House, Instead of citing excess liquidity, the president focussed on the question of whether there was enough liquidity.
“Another factor one has got to look at is whether there is another liquidity in the system to enable markets to correct,” Bush said. “And I’m told there is enough liquidity to enable markets to correct.”
As we noted in Opening Bell this morning, yesterday’s remarks from the president echoed the arguments of the Austrian school of economics. Many economists working in the Austrian school have argued that the boom-and-bust business cycle is set off by central bank monetary expansion.
For a few hours, it seemed that America had suddenly discovered it was being led by a president schooled in the Austrian theory of the business cycle. “Has Dub-Yuh broken his habit of never reading anything, even the newspapers, and picked up a copy of America’s Great Depression by Murray Rothbard for his summer vacation reading?” economist Thomas DiLorenzo asked on the blog at LewRockwell.com.
Or perhaps he has been reading Barron’s, which recently described the Austrian theory:

In the Austrians’ staunchly free-market ideal, if central banks peg the cost of credit below its natural rate, it results in an excessive credit expansion and inflation, which includes asset prices. Rising asset prices result in bubbles and malinvestments, which invariably lead to busts in direct proportion the preceding bubble. The only solution to the bust is to ride it out, allowing prices to fall and the assets to liquidate, permitting the capital that has been misallocated to be put to more productive uses.

This morning’s remarks, while not calling for a credit expansion, clearly pointed away from the risks of too much liquidity to the risks of too little liquidity. It was a change of emphasis. Someone, it seems, has given Bush a stern talking to. With the European Central Bank injecting $130.5 billion of Euros into the markets and the Fed making smaller moves to increase liquidity, the message of the central bankers is certainly not of the Austrian school.

30 comments (hidden for your protection)
Show all comments ↓

Comments (30)

  1. Posted by Anonymous | August 9, 2007 at 11:27 AM

    good looking out Carney.

  2. Posted by John Maynard Von Mises | August 9, 2007 at 11:57 AM

    The faction group known as the “burganland school of economics” has always proposed increasing liquidity in the face of higher inflation. They had great results with their work in the Central Banks of Yugoslavia and Zaire during the 90s.
    http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=e967658f-9514-465d-a0d7-0ce004009742

  3. Posted by george washington | August 9, 2007 at 12:15 PM

    I just love it when 2 different branches of our government act contradictory to each other, i mean honestly who’d want it any other way

  4. Posted by Fake Lili Reifenthal | August 9, 2007 at 12:27 PM

    Oh no! Near German economics! Thank Got that there haven’t been any Presidential displays like in my movie “Triumph of the Will” where dear Adolph flies down in a Fokker triplane from the clouds to land in front of cheering throngs of Berliners to declare the worst is over and……huh?….Was ist?…..you mean…on an aircraft carrier??….Mission accomplished???….oh no…well, the Devil has been looking for Karl Rove so now we know where to look, ja??

  5. Posted by Fake Lili Reifenstahl | August 9, 2007 at 12:28 PM

    Oh no! Near German economics! Thank Got that there haven’t been any Presidential displays like in my movie “Triumph of the Will” where dear Adolph flies down in a Fokker triplane from the clouds to land in front of cheering throngs of Berliners to declare the worst is over and……huh?….Was ist?…..you mean…on an aircraft carrier??….Mission accomplished???….oh no…well, the Devil has been looking for Karl Rove so now we know where to look, ja??

  6. Posted by anon anon anon | August 9, 2007 at 12:50 PM

    I see the hand of Karl Von Mises Rove behind this play.

  7. Posted by cheap oem software | May 1, 2012 at 9:54 AM

    Osb7wb Say, you got a nice post.Really looking forward to read more. Want more.

  8. Posted by business loans | May 3, 2012 at 4:12 PM

    Really informative blog.Really thank you! Great.

  9. Posted by truck | May 3, 2012 at 6:17 PM

    Major thanks for the article post.Really thank you! Really Cool.

  10. Posted by loan singapore | May 3, 2012 at 7:13 PM

    This is one awesome article. Awesome.

  11. Posted by usability testing | May 3, 2012 at 11:44 PM

    I value the blog article.Really looking forward to read more. Really Great.

  12. Posted by Craigslist Cars For Sale | May 4, 2012 at 4:16 AM

    Say, you got a nice blog article.Much thanks again. Keep writing.

  13. Posted by fuck | May 4, 2012 at 6:33 AM

    Thanks again for the post.Really thank you!

  14. Posted by Sex | May 5, 2012 at 1:57 AM

    Thanks so much for the blog article.Really thank you! Much obliged.

  15. Posted by cheating | May 5, 2012 at 3:29 AM

    Very good post.Much thanks again. Will read on…

  16. Posted by pussy | May 5, 2012 at 6:26 AM

    I think this is a real great blog article.Thanks Again. Really Cool.

  17. Posted by gold investment advice | May 5, 2012 at 10:04 AM

    I really liked your blog post. Cool.

  18. Posted by Web Design Perth | May 7, 2012 at 10:15 AM

    Major thanks for the article post.Thanks Again. Much obliged.

  19. Posted by fx live | May 7, 2012 at 7:18 PM

    Really appreciate you sharing this blog post.Thanks Again. Keep writing.

  20. Posted by iddaa | May 7, 2012 at 9:18 PM

    Really informative blog article.Thanks Again. Really Great.

  21. Posted by backgrounds for facebook | May 8, 2012 at 12:57 AM

    Great, thanks for sharing this post.Much thanks again. Great.

  22. Posted by Brisbane webdesign | May 8, 2012 at 6:57 AM

    Hey, thanks for the article.Thanks Again. Cool.

  23. Posted by wow power level | May 8, 2012 at 8:42 PM

    Im thankful for the post.Thanks Again.

  24. Posted by Top Movies | May 8, 2012 at 10:08 PM

    Great blog.Really thank you! Great.

  25. Posted by iphone 4 leather case | May 8, 2012 at 10:12 PM

    I really like and appreciate your article. Awesome.

  26. Posted by investment | May 9, 2012 at 1:55 AM

    Hey, thanks for the blog article.Really looking forward to read more. Want more.

  27. Posted by html template | May 9, 2012 at 5:55 AM

    Very good blog article.Much thanks again. Great.

  28. Posted by gay porn | May 10, 2012 at 3:28 AM

    Very good post.Really thank you! Cool.

  29. Posted by Affiliate Marketing Strategies | May 10, 2012 at 6:52 AM

    I really like and appreciate your post.Much thanks again. Awesome.

  30. Posted by phentabz reviews | June 6, 2012 at 7:24 PM

    Im thankful for the post.Thanks Again. Cool.