I think it’s safe to say that if the stock market crashes within the next 2 years or so, that both Austrians and Keynesians (as well as MMTers) are going to say, “We told you so.”
Now I know very well the reasons I think that may happen. Look at the chart of the S&P 500–to me it looks like we are in the midst of our third bubble in 12 years. Especially this time around, the resurgence in the stock market is clearly due to the Fed’s extraordinary interventions. So if you’re like me and think creating $1.6 trillion in new base money doesn’t really “help,” then it won’t be a surprise at all if things come crashing down. (I’ve written elsewhere that if just emerge slowly out of this without any major hiccups, it would make me re-think my worldview.)
It’s certainly true that Krugman and some other prominent Keynesians have personally been predicting bad times. But my question is: Does that actually follow from standard Keynesian models? I mean, is it the stimulus ending that is supposed to cause a double dip?
To take another example, what about the quasi-monetarists? If the problem is that there was a sudden surge in the demand to hold money, and wages are locked in to a certain growth rate, then that problem should ease over time, right?