Under discussion: Meltdown: A Free Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse, Thomas E. Woods Jr., Regnery (2009), 194 pages.
Reality often bites, but news this fall of collapsing asset values and housing prices hit a baffled American public like a bombshell. After all, for years, so many Americans had been basking in the glow of their 401Ks and home-equity loans and generally enjoying the most prosperous years of their lives. Playing the stock market. Buying up Dream Houses with no money down. Going on fantasy vacations. Wasn’t that the American Dream? What the hell happened!?!
The term American dream was coined by author James Truslow Adams in his 1931 book, The Epic of America. He wrote: It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position.
Reading that, it’s clear that the modern interpretation has strayed far from the original meaning. In fact, the American Dream represents something more than the cars and big money that Adams warned about. Central planners and social engineers misappropriated the term a long time ago, and put it into use as a slogan to convey a sense of entitlement and equality as they began to shape and subsidize the home ownership nation that first got started with the creation of Fannie Mae in 1938.
In his new book, Meltdown, Thomas E. Woods Jr. suggests that the American dream became the American Nightmare through the reckless, self-serving actions of government institutions. And at once, Woods puts his finger on the unmistakable elephant in the living room — the Federal Reserve System. Sad to say, other than a few assorted rumblings, there has been almost no discussion in the mainstream media of the Federal Reserve’s role in launching the crisis. But as Woods details, the Fed, which centrally plans monetary policy and interest rates, sowed the seeds of destruction by drastically reducing interest rates beyond levels that would otherwise have been set by a free market. Making cheap credit available for the asking does encourage excessive leverage, speculation, and indebtedness, Mr. Woods writes. He adds, Manipulating interest rates and thereby misleading investors about real economic conditions does in fact misdirect capital into unsustainable lines of production and discombobulate the market. This begins the authors’ explanation of the boom-bust phenomenon and how an artificial boom, and the financial holocaust it leaves behind, can be perfectly clarified and understood in terms of the Austrian theory of the business cycle.