Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and the Government Bailout by Woods Jr. Thomas E

Author:Woods, Jr., Thomas E.
Language: eng
Format: epub
Publisher: Regnery Publishing
Published: 2009-02-09T08:00:00+00:00

The Austrian economist Ludwig von Mises, on the other hand, understood that the inflationary boom was inherently unsustainable and had to come to an end. The permanent prosperity that mainstream economists spoke of was a fantasy, a fraud. “It is clear,” said Mises, “that the crisis must come sooner or later. It is also clear that the crisis must always be caused, primarily and directly, by the change in the conduct of the banks. If we speak of error on the part of the banks, however, we must point to the wrong they do in encouraging the upswing. The fault lies, not with the policy of raising the interest rate, but only with the fact that it was raised too late.”31 It was indeed possible to avoid the business cycle, he said, but not through supposedly scientific management of interest rates and the money supply by a central bank like the Fed. Such manipulation and the discoordination in production it caused only sowed the seeds for future business cycles. Central planning, in short, was not the solution. “The only way to do away with, or even to alleviate, the periodic return of the trade cycle—with its denouement, the crisis—is to reject the fallacy that prosperity can be produced by using banking procedures to make credit cheap.”32

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