'Anyhow, one may wonder why financial institutions have been so short term and were unable to forecast the future. One reason may be ignorance: most bankers do not know the Austrian theory of the business cycle.'<blockquote>'It may seem somewhat presumptuous for me to speak of the financial crisis here, in the temple of the right theory of business cycles. By the way, during past months, I have been intellectually fed by the Mises Institute, which has helped me to better understand the events and to better explain them in France.
To be sure, the present crisis ought to induce people to recognize that there is no valid theory of the business cycle except the Austrian one. But, although it is obvious that the crisis has not been caused by an excess of capitalism — quite the contrary — all over the world, the same statements are endlessly repeated: self-adjustments by markets have failed and we have to celebrate the coming back of the state.
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Anyhow, one may wonder why financial institutions have been so short term and were unable to forecast the future. One reason may be ignorance: most bankers do not know the Austrian theory of the business cycle. But there is another reason, namely the existence of a shortfall of real capitalists, i.e., owners of capital. Big banks are bureaucracies in which the decisions are not taken by the innumerable shareholders but by managers. Managers are wage earners and not capitalists. And wage earners — contrary to capitalists — are shortsighted: they rationally try to maximize their incomes in the short run. If their bank fails, they do not lose any capital. They may lose their job for a while, but their human capital remains intact.
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How can we create a virtuous circle? People have to be convinced that the capitalist system is self-adjusting and that regulations are not the necessary way to obtain adjustment. But there is a terrific job to carry on, in educating people and in persuading governments that they have to reverse the stream, not gradually and piece by piece but through a complete and rapid change of system. From this point of view, the Mises Institute has a historical responsibility as one of the rare places where a correct analysis of the working of free markets can be found.
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To end, let me recall some statements I have made in the present lecture and which may be acceptable for all those who are here:
<blockquote>
* There is no need to create money.
* There is never any balance-of-payments problem.
* The financial crisis is not a crisis of capitalism but of state intervention.
* One ought to suppress central banks and the IMF.</blockquote>
Such statements — which I strongly believe — are not easily accepted by public opinion or even by most economists.
When expressing such views, I may be considered as foolish or as a dangerous extremist — an ultraliberal — and I must confess that I need some courage to go on with such ideas, especially in my country.
But I cannot do it alone. I need the support of people I admire, and that is why I want to thank the Mises Institute and you all here, from the bottom of my heart.'
- Pascal Salin,
Austrian Economics: The Ultimate Achievement of an Intellectual Journey, 2/13/2009</blockquote>