This is Congressman Paul’s foreword to Thomas Woods’ new book, Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse, a New York Times bestseller as of March 1.
Many Americans are looking to the new administration to solve our economic problems. Unfortunately, that is probably a vain hope. Although we were promised "change," we are likely to get a continuation of the same superficial economic fixes that have damaged so many economies in the past, and that will only delay the return of prosperity.
These fixes are based on the false belief that the free-market economy has failed. But it is not the market that has failed. It is intervention into the market that has failed. The Federal Reserve and its manipulation of money and interest rates have failed. None of this can be blamed on the free market, but that isn’t stopping newspaper columnists from doing so anyway.
Keynesian so-called economists, led by Paul Krugman, are vainly reaching into their usual bag of tricks to try to solve the problems of intervention with more intervention, and nothing is working. But they are persistent. They’ll keep scrounging around in that bag all throughout the Obama administration. The slump will continue, since none of these tricks has the slightest thing to do with the underlying problems in the economy. All we’ll have to show for them is an empty Keynesian bag and lot more unpayable debt.
Meanwhile, who’s being ignored during this crisis? The free-market economists of the Austrian School of economic thought, the very people who predicted not only the Great Depression, but also the calamity we’re dealing with today. The good news is that Austrian School economists are gaining more acceptance every day, and have a greater chance of influencing our future than they’ve had for a long time. I’m told that Google searches for "Austrian economics" are off the charts.
We can probably expect an avalanche of books in the coming months that purport to tell us what happened to the economy and what we should do about it. They’ll be dead wrong, and most of the advice they provide will be dreadful. You can count on that.
That’s why Meltdown is so important. This book actually gets things right. It correctly identifies our problems, their causes, and what we should do about them. It treats the architects of this debacle not with the undeserved reverence they receive in Washington and on television, but with the critical eye that is so conspicuously missing from our supposedly independent thinkers in academia and the media. Tom Woods reserves his admiration for those few who, unlike the quacks who would instruct us now, actually saw the crisis coming, have a theory to explain it, and can show us the way out.
In a short span, Tom introduces the layman to a range of subjects that have been excluded from our national discussion for much too long. Topics our opinion leaders thought they’d buried forever, or never heard of in the first place, are suddenly back, and not a moment too soon. This book is an indispensable conduit of these critical ideas. Among many other things, Tom explains Austrian business cycle theory, which he correctly identifies as the single most important piece of economic knowledge for Americans to have right now. In so doing, Tom provides Americans with the most persuasive and rational account of how we got here. Only if we correctly assess the causes of the debacle can we hope to propose a path to recovery that might actually work and not simply prolong the agony.
Our years of living beyond our means, buying everything on credit and on money printed out of thin air, are over. Sure, our government will carry on with its nonsensical policy of curing indebtedness with more indebtedness, inflation with more inflation, but the game is up. It’s not going to work. What are they going to do when the entitlement crisis hits and the federal government is suddenly on the hook for tens of trillions of dollars? If they try to print their way out of that one, they’ll destroy the dollar for good, if they haven’t done so already with all these bailouts. The resources aren’t there. It’s time we recognized this like adults and adjusted our behavior accordingly. The more we intervene and the more we prop up economic zombies, the worse off we’ll be. But the sooner we understand what has happened, assess our economic situation honestly, and rebuild our economy on a sound foundation, the sooner our fortunes will be restored.
Ideas still matter, and sound economic education has rarely been as urgently necessary as it is today. There is no better book to read on the present crisis than this one, and that is why I am delighted to endorse and introduce it.
February 23, 2009
Dr. Ron Paul is a Republican member of Congress from Texas.