The Randian concept of a Galt Strike is that if the elite slack off, the masses will be impoverished – that countries are rich or poor according to whether the elite is productive, while the masses and resources do not matter much, except in extreme cases such as oil rich sheikdoms.
There has been a large fall in GDP over the past six months:
The Keynesian explanation of this fall is inadequate aggregate demand – the economy could easily produce more, but no one is spending due to depression of animal spirits, in which case a big spending government will make everything rosy.
The Austrian and Chicago explanation is complicated, and perhaps confused.
The Randian explanation is that it is a Galt Strike – the elite are slacking off, and focusing on hiding their wealth and economic activities from the government, rather than creating value, in which case big government spending will merely result in inflation or massive borrowing from abroad.
Core CPI will in time tell us which account is correct. We will know by about November 2010.
- If late in 2010 core CPI is substantially higher, nominal GDP substantially higher, but real GDP still woeful, then Randians will have been proven correct.
- If late in 2010 core CPI is lower or unchanged, then both sides can argue they were right, and the Austrians will probably have some explanation that I will be disinclined to follow.
- If late in 2010 core CPI only rises moderately, but real GDP rises substantially, then Keynesians will have been proven correct.
I am betting on disturbing levels of core inflation with a distinctly unimpressive recovery in real GDP.