…so it’s best not to take him seriously on these matters.
Responding to a part of a Steven Horwitz post that talks about aggregate demand shortages, Wenzel writes,
This is as far from Austrian theory as you can get. Austrian school economists see central bank monetary expansion as distorting the economy.
This shows the extent of Wenzel’s understanding. He can’t separate the concept of an aggregate demand shortage from that of an oversupply of money by the Federal Reserve. This means he can’t realize that aggregate demand shortages are relevant even in a world where there is no central bank. And aggregate demand shortages need to be resolved through an equilibration of the supply and demand for money, whether through a falling price level or an increase in the supply of money. Any disequilibrium means there’s room for entrepreneurship, and that’s just what private banks (or clearing houses) with foresight do: increase the supply of money.
This type of behavior is just what I try to explain in an older post, “Epistemology of Rejection.” I use the exact same topic to illustrate what I mean. (Of course, some “Austrians” took it personally — I was much more polite there than I am here. I’m taking a cue from Krugman: snark is necessary in an environment where credentials don’t matter.)