Why the Depression

by Thomas E. Woods, Jr.
by Thomas E. Woods, Jr.

"Advocates of the free market must confront the fact that both the Great Depression and the current financial chaos were preceded by years of laissez-faire economic policies," write Katrina van den Heuvel, editor of The Nation, and author Eric Schlossel.

Knowing full well that inanities like this would become the received version of events, I wrote a book for the layman explaining what really happened to the economy, who the true culprits are, and why the free market is the only approach that hasn’t been tried. It’s called Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse, and it was released yesterday. My publisher has made a free chapter available for download.

I wrote Meltdown in order to give the free-market point of view the advantage of being one of the first, if not the first, of the inevitable avalanche of books on the crisis. (Paul Krugman, as well as the editors of The Nation, have published books of rehashed columns, but those don’t count.) I also wanted the free-market point of view to have the advantage of a book-length defense in the first place. I know of one self-described libertarian who has a book on the economy coming out this year, but since he supported the bailouts, his prescription isn’t exactly going to be traditional laissez faire.

And that, as we know, is the one position the establishment is trying to pretend doesn’t exist. It’s not exactly clear how the Federal Reserve’s policy of pushing interest rates well below where the free market would have set them, thereby inflating the biggest asset bubble in the history of the world, could be the fault of the free market, or attributable to "laissez faire." But since hardly anyone discusses the Fed, no one has to answer this inconvenient question. The Fed’s very existence is a violation of laissez faire. Yet the destructive effects of what it does are then blamed on the market. This charade has gone on long enough.

Here are some of the topics the book covers:

• The housing bubble and its causes
• Fannie and Freddie, the Community Reinvestment Act
• The Federal Reserve System: the elephant in the living room
• Is this a simple matter of "regulation" vs. "deregulation"?
• Who predicted the crash, who didn’t, and what that means
• The "too big to fail" dogma
• The bailouts: truth and propaganda
• Where the boom-bust cycle comes from
• The foolishness of fiscal "stimulus"
• Previous booms and busts in American history, from the Panic of 1819 to the dot-com boom, and what we can learn from them
• The policies that failed in Japan, and their eerie similarity to the policies urged upon us now
• "Great Myths About the Great Depression"
• Money, inflation, gold, silver, legal tender – and why they matter now
• Common fallacies answered
• How to minimize the (inevitable) pain

A very nice foreword from Congressman Ron Paul, for whom being vindicated is probably becoming a wearying thing, is an extremely welcome addition to Meltdown.

The Austrian School is not going to have another opportunity of this magnitude to get its message heard for a long time. If we don’t seize this chance, we have only ourselves to blame. That’s why I decided to write this book.

February 10, 2009

Thomas E. Woods, Jr. [send him mail] is senior fellow in American history at the Ludwig von Mises Institute. He is the author of nine books, including the New York Times bestseller The Politically Incorrect Guide to American History and, most recently, Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse. Visit his new website.

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