OK, maybe that's a bit strong, but von Mises, and the whole Austrian school are discredited.
Fortunately for them and for the Western world - which is essentially broke - China is NOT following the Austrian school at all, and they are so far ahead of the Chicago Quants and Austrian (supposedly) free-marketers that those two groups literally can't comprehend how China manages its economy.
To begin with, China IS managing its economy, something Bernanke and company are not - they are constantly playing catch-up, reacting instead of being proactive like China.
China has boosted its reserve requirements since the beginning of the year, to, now, about 16%, vs. 8% here (and really, when you strip away the smoke and mirrors, zero). Furthermore, they are requiring at LEAST 20% down on all home purchases, and as much as 50%(!) in hot cities like Beijing (where government employees get stipends and create a local housing bubble, it is true). This is not a perfect solution - simply collecting Ground Rent from landlords and speculators would be better and more direct, but it gets to the same place indirectly - cooling off a housing bubble before it can form.
The free marketers won't even admit that a managed economy is doable, hence their refusal to see a working model in action. They would rather have periodic booms and busts, than admit their economic model is fundamentally flawed, and fatally too.
China is miles ahead of the U.S. in economic management. It is an economy run by serious economists who learn from their mistakes - and ours - and who are not beholden to political partisanship and game-playing for the sake of the election cycle, from a public who is generally too stupid and selfish to understand how the real economy works.
Yes, there are serious human rights issues, but it is neither as bad there, nor as good here, as the Right and Tea Partiers would like us to believe. Besides, that's got little to do with macro-economic management.
Don't be fooled by wild swings of the Chinese stock market. That, unfortunately, remains a gambler's playground, both in China and from investors abroad who sell EVERYTHING at once, regardless of the fundamentals (witness the global sell-off yesterday based on fears of a Sovereign Debt Crisis - something China is NOT susceptible to). The Chinese economy is sound and will be the largest economy in 10 years (not 20 as is widely predicted), unless the West makes serious reforms in nearly every aspect of the economy. This does not mean giving up capitalism. It does mean giving up rigged, favoritism-based capitalism which reward monster failures and punishes small succeeders.
We also need:
1. serious tax reform to untax productivity and seriously tax natural resource use and abuse (e.g. the Gulf BP disaster, the West Virginia coal mine mess etc.).
2. State Banks to pry money away from Money Leveraging Institutions (MLIs).
3. Monetary reform to return money production back to the government where the constitution puts it (Article 1, section 8) and not the MLIs. A "Public Option for Money," as Max Keiser put it when he interviewed me. To prevent inflation, this newly created money should be targeted to things we unquestionably need, like infrastructure. See the American Monetary Institute for more information.
4. Educational reform to teach children about the real world, not the myths of one made up 2,000 years ago. Today's world requires leaders in science, math, reading comprehension, logical & rational thinking, not superstition and pandering.
5. Campaign finance reform to return the funding of candidates back to the People instead of We the Corporation or their proxies like Citizen's United. (We also need to end the escalating corruption of our actual voting process so elections aren't stolen, or given away by high-handed Supreme Court judges, like in 2000).
6. Serious media that investigates news and doesn't parrot back whatever the current administration says, and treats citizens like the adults they ought to be.
A tall order? Yes, absolutely. That's why I believe China, not America, will rule the century, even with their own problems of Authoritarian Capitalism. After all, the seat of human civilization was in Southeast Asia for most of human history, the bulk of human population is still there, and the leading innovations are now there too (including the lead in Green Energy - China now produces more wind power than we do). Why wouldn't things return to where they've been historically? Or...do you think we are just gifted by God and Race? Better rethink that one.
This just arrived in my email today from Tony Sagami, a Financial Analyst that writes Uncommon Wisdom, specializing in Southeast Asia investments. Read this and then decide for yourself where the world economy is going to be in 10 years:
The International Monetary Fund is an international organization that oversees the global financial situation of its 186 member countries. The IMF was formed with the goal of stabilizing international exchange rates and to provide financial assistance to countries that experience serious financial and economic difficulties with loans and other forms of financial aid.
Tracking those economic developments on a national, regional and global basis requires an army of economists, so the IMF has a very good handle on the global financial picture.
What the IMF sees in India impresses the heck out of it. The International Monetary Fund is now forecasting that China and India will generate 40% of the world's growth in the next two years.and
Forty percent? Wow! Let me give you some perspective on how impressive that is.
- Twenty years ago, China and India generated just 10% of the
world's economic growth.
- Ten years ago, it improved to 18%.
- China alone will generate more growth than the entire G7 (the
U.S., the U.K., Germany, France,
- India will generate more growth than all the 27 countries in the European Union.
China and India aren't the only countries in Asia that are prospering. The IMF says that China, Indian, and the 10 ASEAN nations (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myamar, Philippines, Singapore, Thailand, and Vietnam) will generate half the world's growth.
"By the end of 2009, output in most of Asia returned to pre-crisis levels even in those economies that were hit hardest by the crisis. After the deepest recession in recent history globally, we know that Asia is leading this global recovery," said Anoop Singh of the International Monetary.
China and India, with growth rates of 10% and 8.8% respectively, are the economic engines behind that roaring growth.