> I don't think Keynsian or Austrian economics is in favor of or really even addresses the idea of bank bailouts
Neither school directly addresses the idea in the form we observe today - QE injections of liquidity to prevent runs that should bankrupt institutions that trade against/leverage an unsustainable amount of toxic assets - because central banks did not count QE as a viable option in their quiver of monetary policy tools until the BOJ (Bank of Japan) began to use QE in the early 2000's to try and solve secular stagnation. Hence why QE was termed "unconventional" monetary policy when the Fed and other major central banks started to use it as the FFR approached zero post financial-crisis.
"Keynesian" economists tend to favor intervention (leaning towards market manipulation), whereas "Austrian" economists tend to favor austerity (leaning towards free market). This is a gross oversimplification, as there is a huge range of thinking on both sides that spans many different views on the role of government in various markets. But let's use it as a rough way to judge QE:
OK, so corruption got out of hand - bankers did not live up to their fiduciary duty to protect investors. Predatory investors took out loans with the intent to default and dump property on banks. Excess leverage backed with toxic assets occurs and the system fails. Fine. What do we do next?
Austrians would call for austerity - let the corrupt institutions fail, enter bankruptcy, and be reformed. The system would tear itself apart and be reborn from the ashes. No misdirection of resources, no boom and bust.
Keynesians (who largely supported QE [1]) would call for intervention - prop the old system up, relieve the private sector of risk, inject liquidity into failing institutions, create artificial demand.
Obviously neither economic system calls for more corruption, but both acknowledge that it is an inherent human trait. Where they generally differ is in their response to crises brought on by corruption.
Neither school directly addresses the idea in the form we observe today - QE injections of liquidity to prevent runs that should bankrupt institutions that trade against/leverage an unsustainable amount of toxic assets - because central banks did not count QE as a viable option in their quiver of monetary policy tools until the BOJ (Bank of Japan) began to use QE in the early 2000's to try and solve secular stagnation. Hence why QE was termed "unconventional" monetary policy when the Fed and other major central banks started to use it as the FFR approached zero post financial-crisis.
"Keynesian" economists tend to favor intervention (leaning towards market manipulation), whereas "Austrian" economists tend to favor austerity (leaning towards free market). This is a gross oversimplification, as there is a huge range of thinking on both sides that spans many different views on the role of government in various markets. But let's use it as a rough way to judge QE:
OK, so corruption got out of hand - bankers did not live up to their fiduciary duty to protect investors. Predatory investors took out loans with the intent to default and dump property on banks. Excess leverage backed with toxic assets occurs and the system fails. Fine. What do we do next?
Austrians would call for austerity - let the corrupt institutions fail, enter bankruptcy, and be reformed. The system would tear itself apart and be reborn from the ashes. No misdirection of resources, no boom and bust.
Keynesians (who largely supported QE [1]) would call for intervention - prop the old system up, relieve the private sector of risk, inject liquidity into failing institutions, create artificial demand.
Obviously neither economic system calls for more corruption, but both acknowledge that it is an inherent human trait. Where they generally differ is in their response to crises brought on by corruption.