Read Mises: Financial Crises are Predictable – and Preventable




Central Economic Planning at its Worst

by Ron Paul

Last week, the Financial Crisis Inquiry Commission (FCIC) presented its results to the Financial Services Committee. As with most other politically-appointed commissions, the results of the FCIC’s investigation were easy to predict. Established by the same congress that gave us national healthcare and with a majority of its members appointed by those who seek to solve every problem with more government intervention, it was no surprise that the commission’s findings would favor increased government intervention in the economy. Minority members were not substantively involved in the commission’s operations, and the commission attempted to exclude their dissenting views by granting them very limited space to do so.

However, even the minority members of the commission failed to consider the most important cause of the financial crisis, namely the Federal Reserve’s loose monetary policy. Almost a century ago, in 1912, Ludwig von Mises published his great work The Theory of Money and Credit. This was the first systematic description of Austrian Business Cycle Theory (ABCT), which explains the origins of the business cycle in monetary expansion. This theory explains why so many businessmen make so many of the same errors at the same time. Yet not a single member of the commission undertook an analysis of the financial crisis from an Austrian economic viewpoint.

Instead, blame was placed on failures in financial regulation and corporate governance, excessive borrowing and risky investments, and expansion of subprime lending, among other factors. But none of these explanations can answer why this crisis occurred. Why was there excessive borrowing? Why was there an explosion of subprime lending? Why were there failures in corporate governance? Why did virtually no one except Austrian economists see this coming?

Without the Federal Reserve’s massive expansion of credit throughout the 1990s and early 2000s, there could have been no excessive borrowing or explosion of subprime lending. Through easy credit, the Fed initiated the economic boom that created the dot-com bubble. When that bubble burst the Fed pumped additional liquidity into the system, which led to a new boom that created the housing bubble. And now the Fed’s additional trillions of dollars in monetary pumping is creating yet another bubble. This is the exact opposite of stability in the marketplace and has nothing to do with free markets. It is central economic planning at its worst.

It is imperative that the historic record accurately reflect what actually happened. In the popular press we see columnists attempting to blame the financial crisis on the “small-government,” “free-market” policies of President Bush. Hundreds of billions of dollars in stimulus payments, a $700 billion bailout program, and trillions of dollars of Federal Reserve credit facilities hardly represent small-government and free-market principles in action! On the contrary, these government interventions by both major parties demonstrate quite clearly our nation’s acceptance of crony capitalism.

Schoolchildren today are taught the myth that Herbert Hoover was a small-government President who did nothing to stop the Depression, while the truth is exactly the opposite. Fed Chairman Bernanke failed to understand the true cause of the Great Depression, so his policy prescriptions to combat the current crisis are understandably flawed. Unless we confront and correct false economic rhetoric, truly understand the causes of the economic crisis, and do away with our loose monetary policy, we will find ourselves in ever more vicious business cycles.



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42 Comments:

  1. ALL FOR RON AND RON FOR ALL!!!

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  2. ALL FOR RON AND RON FOR ALL!!!

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  3. ALL FOR RON AND RON FOR ALL!!!

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  4. ALL FOR RON AND RON FOR ALL!!!

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  5. ALL FOR RON AND RON FOR ALL!!!

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  6. ALL FOR RON AND RON FOR ALL!!!

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  7. "what do I tell my daughter when we cant eat and were on the street?"

    I have one - "I made a mistake working for the mafia government, that's bankrupted this nation, and has made you a slave, dear".

    How about that?

    Sorry you made some poor choices, but I'm REALLY sorry I am forced to pay for them by this fascist, corrupt, lying, morally bankrupt government.

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  8. Hahaha.

    Here's the video.

    watch?v=xPhyN4Ev6ck

    Would you care to point out where you think Paul failed? Please where we should be looking in the video for what you think are Paul's supposedly massive screwups.

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  9. Oooh to dollar appreciated 12%.. against what?

    Let's see, I bought gold at $500 an ounce. It's $1,4000 now. I bought silver at $10 an ounce, and it's $33 now. I did that in part because of Schiff.

    I can't predict manipulations in the market, but I can follow the trend. When Lehman died and JP Morgan inherited all their assets, JP Morgan knocked everything down. That's why I got silver at $10. I also got it at $13.

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  10. Oooh to dollar appreciated 12%.. against what?

    Let's see, I bought gold at $500 an ounce. It's $1,4000 now. I bought silver at $10 an ounce, and it's $33 now. I did that in part because of Schiff.

    I can't predict manipulations in the market, but I can follow the trend. When Lehman died and JP Morgan inherited all their assets, JP Morgan knocked everything down. That's why I got silver at $10. I also got it at $13.

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  11. he said he was prepping them for more - but it did come off more about his economic philosophy which most americans don''t really cares about.

    I wish he would just run these guys through the coal and arrest the crooks. Make a splash only way to get the American people's attention

    I don't knwo what racists you're talking about

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  12. > As a matter of fact, almost every gold bug has predicted
    > "imminent hyperinflation" for the past 30 years.Schiff
    > advices his clients to get out of the dollar in 2008.
    > They took his advice and lost millions.

    I'm a "gold bug" and I listen to Ron Paul, Schiff, Faber, the Aden Sisters, Harry Schultz, etc.

    Trust me, I didn't lose a dime. You don't know what you're talking about.

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  13. "If Bernanke raises interest rates, that will create disinflation, not create hyperinflation."

    If Bernanke raised interest rates to just 15% - what they were in the 1980s, the interest on the National Debt would be equal to the entire tax revenue of the nation.

    Raising interest rates to a modest 7.5% would only consume 50% of the tax revenue. We will never see anything beyond 5% again.

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  14. will the GOP give Ron Paul any real power?

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  15. Ron if you do not want destruction and annihilation find me nothing you people do will change one thing but even one thing i do will change everything know the wisdom of allah I am in it!
    If you have been given time by the christ and you have I am the clock keeper and i will set the alarm onto the end!

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  16. we need to find a way to protect Dr.Ron Paul and his family from possible assassination from dark kings represented by private held central bankers like Federal Reserve System, Bank of England, etc.

    Revealing truth alone is not enough to get back America to its hard working citizens. Action as an army is required !!!

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  17. Oh no! Its the famous "broken clock" arguement. Well sir youve surely whipped my ass there with your asinine statement. There was no hyper-inflationary depression warned for 2008 so congrats for mis quoting there as well. Whats been warned is that if the fed followed its policies there would be bad to hyperinflation to come. 200% in hyperinflation and we might get much worst than that!
    "since it hasn't shown up they want to claim govt is falsifying price data" Check the CRB idiot

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  18. just wait until bernanke lets the interest rates go to where it should be.....hyperinflation will be all too real then

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  19. bernanke knows EXACTLY what he is doing... bancrupting the country and transferring every red cent into the pockets of the CENTRAL BANKING ELITE...
    i am totally mystified at how these banks are being ALLOWED to continue to ROB every country in the world.... if i steal a loaf of bread because i'm broke and hungry- I GO TO JAIL..... WHY ARE THESE PEOPLE NOT IN JAIL???????
    thank you, Dr Paul for educating me and others.....live long and prosper

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  20. porque este hombre no es su Presidente? Ese pendejo de ProgressiveAmerica, que le pasa?

    (Translation: Why isn't this man your president? That idiot ProgressiveAmerica), what's wrong with him?)

    -Desde Japon, Hector M.

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