Booms and Busts

Haiti's government and other governments need to get out of the way and not make a market-based recovery process more difficult than it has to be.

When interest rates drop, entrepreneurs have no reliable way to tell whether, and to what extent, the drop is caused by (A) true increases in the ongoing flow of investable resources or by (B) what amounts to a temporary series of one-time transfers of wealth into the loan market. With such Fed-imposed blindness to the true data of the market, businesses across the whole economy are bound to make malinvestments.

Republican policy has always been high tariffs, keeping foreign goods out. But, then the US would lend those countries money to be able to pay for our higher-priced exports. This peculiar foreign-lending scheme included farm goods. Until 1928 there was an enormous foreign lending boom. The stock market collapsed in October 1929.

The Industrial Revolution and the development of the modern banking system were the two big things that happened in the Eighteenth Century in Britain. Why does the boom-bust cycle emerge? Is the cycle just a natural part of industry, or is it caused by the banking system?

The claim that the innovative capacity of modern capitalistic societies sows the seed of general crises can be refuted, for such cyclical patterns only unfold if new innovations are financed by an expansion of fiduciary money instead of by voluntary savings.

So, some Americans are unloading their family treasures and cheering for bailouts, money printing, and gun control, while others are stocking up on precious metals, guns, and ammo to protect themselves and their wealth.

There is no question which group is the civilized one.

Although John Cassidy didn't realize it, his analysis underscored the role that government policies played in the recent financial disaster.

To avoid runaway inflation we must have the resolve and the will to cease the inflationary expansion of credit, and to force the Federal Reserve System to stop purchasing assets, and thereby to stop its continued generation of chronic, accelerating inflation.

"Only savings can allow for sustainable economic growth."

In real life, Keynesianism doesn't work; the government bails out the bankers and then depressions last a long time.