Richard Cantillon saw the essence of the business-cycle problem long ago. When the government's national bank inflates the money supply by increasing the supply of banknotes, he writes, it reduces the rate of interest and can increase the price of stocks. This is a corrupt process.
If there is anything that government is actually good at doing, it is destroying things. Strangely, love for this destruction has become a popular cause, revealed in the push for "sustainability" and the banning of technologies that improve our lives.
The Wikipedia entry on the real-bills doctrine advances the controversial proposition that banks can increase the quantity of money without diminishing the purchasing power of each unit. I will refer to it as the Sproul doctrine.
Thomas Mun set forth what would become the standard mercantilist line. He pointed out that there was nothing particularly evil about the East India Company trade. The company imported valuable drugs, spices, dyes, and cloth from the Indies, and it re-exported most of these products to other countries.
Just as more and more analysts are worried about the economy imploding again, the NBER announces that the recession ended back in June 2009. The whole episode underscores the crudity of mainstream economics.
Hayek noticed that the British habit of proclaiming compromise to be ingenious is an excuse for closing the eyes to unpleasant facts. If there is anyone who is not entitled to put his trust in the genius for compromise and for muddling through, it is the modern planner.
What matters for individuals is not whether they are employed as such but the purchasing power of their earnings.
"The Randist analysis of the nature of crime implies the necessity for a minimal government."
"Let the banks perish. … Now is the time for the complete emancipation of trade from legislative thralldom."
William Leggett (1801–1839)
Because they are based upon a falsehood, Keynesian policies fail empirically, quite obviously to anyone with an open mind.
