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Friday, November 7, 2008

Can this Mess be Fixed?

A lot of people have been asking and wondering, what will work? What can prevent a massive recession? What can prevent a depression? How are our policy makers and political leaders going to ‘fix’ this mess?

The answer is actually a simple one and was very carefully and neatly articulated in the 1920’s.

The Original:

“Es gibt keinen Weg, den finalen Kollaps eines Booms durch Kreditexpansion zu vermeiden. Die Frage ist nur ob die Krise früher durch freiwillige Aufgabe der Kreditexpansion kommen soll, oder später zusammen mit einer finalen und totalen Katastrophe des Währungssystems kommen soll.” - Ludwig von Mises

The Translation:

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” –Ludwig von Mises

Well, we all know which route was chosen for us. One more final, massive, desperate push in credit expansion should just about do it…

Those of you that have never read Ludwig von Mises, I highly recommend you do.

Mises figured out in the 1920’s what our current economic leaders still haven’t figured out. He enraged all the communists and socialists, proving mathematically that non-factor-market (NFM) socialism could never work. This was called the economic calculation problem. All statist regimes face this problem to varying degrees including our own mixed economy. The evidence is plain to see in our history of booms, bubbles and busts.

Market interference via tax policies, subsidies, tariffs, regulation and ridiculous fiscal and monetary policy result in the constant misallocation of scarce resources because they distort market prices and market signals.


Anonymous said...

Nick von Mises said...

Mises is the man

Unknown said...

Excellent post!

Anonymous said...

Would such "market interference" include the legal regulation and creation of patents, copyrights & trademarks? How about protection of caravans and convoys against piracy and brigandage? Can the pirates & thieves complain of excessive "market interference"and over-regulation?

Vijay said...

Awesome Ben! I'm stoked to see you know about Mises. I just picked up a copy of Human Action yesterday and I started a small reading group to get through it. By far the most important economist of the 20th century in my opinion.

Anonymous said...

Hello Ben:

Good stuff, however you forgot the part where all democracies eventually end in a dictatorship. It wont be Japan 2.0 its Weimar 2.0.

Anonymous said...

GOD bless you, Ninja. I'm a PhD professor of Economics who now resides in Latin America and, let me tell me you, when I "found out" about what Mises and the Austrian School wrote on the nature and causes of the business cycle, I so hated myself and so hated my Keynesian training (University of Maryland) for this economic blindness. Professor Huerta de Soto has a great book on credit expansion and the business cycle. I'll leave you with that. But, once more, it is so refreshing to see that more and more bright people (forget about Krugman, he's about to find out what his policies lead to--think Argentina!!!) are beginning to consider that great economist, Ludwig Von Mises. F*** Keynes is so dead.

Anonymous said...

Ben - Congrats on have your eyes opened and reaching the waking state. Now, welcome to the nightmare. - Dave

Anonymous said...

Ben - There is a solution to the Misean problem of Credit Meltdown at the heart of the cascading monetary disorder.

Monetary Reform: Gold And Bills Of Exchange
by Antal E. Fekete

Address before the Civil Society Institute at Santa Clara University, November 3, 2008

How wonderful that it was presented at my MBA alma mater, Santa Clara Univ.

Anonymous said...

That is a superb article by anatal fekete. Thanks dave for the link. I am still trying to integrate it and understand it.
The debate is no longer inflation/deflation, but DISINTEGRATION. The financial system will disintegrate with the collapse of the final bubble....the US Dollar Bubble. Mises himself stated it "...the total and final collapse of the currency system involved"

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