Answer to Austrian Economists

I wrote a piece called "The Great Recession." It prompted a follower of the "Austrian Economists" (A Libertarian group) to ask whether the Federal Reserve was pumping too much money into the economy and whether that was causing recessions.
I said I'd look into it and finally went to my local library after a few unsuccessful internet searches and asked about Federal Reserve Board interest rates going as far back as possible (It was easy to find rates going back a few weeks or months, but the librarian had to search for a bit to find them going back further) and I then pulled up a list of recessions (That wasn't hard at all).

Recession of 1953

1951 1Q	1951 2Q	1951 3Q	1951 4Q	1952 1Q	1952 2Q	1952 3Q	1952 4Q
1.75	1.75	1.75	1.75	1.75	1.75	1.75	1.75

Recession of 1957

1955 1Q	1955 2Q	1955 3Q	1955 4Q	1956 1Q	1956 2Q	1956 3Q	1956 4Q
1.50	1.63	1.75	2.25	2.50	2.65	2.75	3.00

Recession of 1960

1958 1Q	1958 2Q	1958 3Q	1958 4Q	1959 1Q	1959 2Q	1959 3Q	1959 4Q
2.94	2.03	1.75	2.00	2.50	3.00	3.50	4.00

Recession of 1980

1978 1Q	1978 2Q	1978 3Q	1978 4Q	1979 1Q	1979 2Q	1979 3Q	1979 4Q
6.37	6.50	7.23	8.26	9.50	9.50	9.69	11.27

Recession of 1990

1988 1Q	1988 2Q	1988 3Q	1988 4Q	1989 1Q	1989 2Q	1989 3Q	1989 4Q
6.00	6.00	6.00	6.50	6.50	7.00	7.00	7.00

Recession of 2001

1999 1Q	1999 2Q	1999 3Q	1999 4Q	2000 1Q	2000 2Q	2000 3Q	2000 4Q
4.50	4.50	4.50	4.75	5.00	5.50	6.00	6.00

Recession of 2007

2005 1Q	2005 2Q	2005 3Q	2005 4Q	2006 1Q	2006 2Q	2006 3Q	2006 4Q
3.25	3.75	4.25	4.75	5.26	5.75	6.25	6.25

Non-recessions

Non-recession of 1970

1968 1Q	1968 2Q	1968 3Q	1968 4Q	1969 1Q	1969 2Q	1969 3Q	1969 4Q
4.50	5.20	5.50	5.25	5.50	5.95	6.00	6.00

Non-recession of 1996

1994 1Q	1994 2Q	1994 3Q	1994 4Q	1995 1Q	1995 2Q	1995 3Q	1995 4Q
3.00	3.00	3.50	4.00	4.75	5.25	5.25	5.25

Non-recession of 2006

2004 1Q	2004 2Q	2004 3Q	2004 4Q	2005 1Q	2005 2Q	2005 3Q	2005 4Q
2.00	2.00	2.25	2.75	3.25	3.75	4.25	4.75

So what do we have?
1953, interest rates in the two years beforehand were completely flat.
1957, we see what looks like a classic rise with rates going from 1.50 to 3.00.
1960, rates wobbled from 2.94 to 1.75, but then rising from there to 4.00.
1980, 6.37 to 11.27 in a straight line upwards.
1990 saw a very gradual rise from 6.00 to 7.00.
2001 saw another gradual rise from 4.50 to 6.00.
2007 saw a rise from 3.25 to 6.25.
With the non-recessions, we see a rise from 4.50 to 6.00 in 1968-69 not leading to a recession.
1994 to 1995, a rise of 3.00 to 5.25 did not lead to a recession.
2004 to 2005, a rise of 2.00 to 4.75 did not lead to a recession.

So, the initial question I received after I wrote my piece on the economy was "Why didn't I account for the actions of the Fed?" What does the Fed do? Basically, it sets the interest rate. The reason why the economists I read did not account for the interest rate set by the Fed appears to be that there's really not much of a connection between what interest rate the Fed sets and how the economy reacts (Note that the list of recessions I linked to above lists a different reason for each recession). It appears there's usually a rise in the interest rate in the two years before a recession, but not always and sometimes it's a steep rise and sometimes it's a gradual one. 1950-1970, rises tended to be extremely gradual with not much change from quarter to quarter at all. That period saw three recessions.
The early 1980s saw extremely high interest rates, going up as high as 14.00, as Paul Volcker was using those rates to eliminate the inflation that had persisted so stubbornly up to that point.
So I find the explanation that the Fed plays an extremely decisive role in the ups and downs of the economy to be an unconvincing one. Obviously it plays a role, but there appear to be many other meaningful factors that also affect the economy.