|Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse
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If you are fed up with Washington boondoggles, and you like the small-government, politically-incorrect thinking of Ron Paul, then you'll love Tom Woods's Meltdown. In clear, no-nonsense terms, Woods explains what led up to this economic crisis, who's really to blame, and why government bailouts won't work. Woods will reveal:
* Which brave few economists predicted the economic fallout--and why nobody listenedWith a foreword from Ron Paul, Meltdown is the free-market answer to the Fed-created economic crisis. As the new Obama administration inevitably calls for more regulations, Woods argues that the only way to rebuild our economy is by returning to the fundamentals of capitalism and letting the free market work.
* What really caused the collapse
* Why the Fed--not taxpayers--should have to answer for the current economic crisis
* Why bailouts are band-aids that will only provide temporary relief and ultimately make things worse
* What we should do instead, to put our economy on a healthy path to recovery
- Great overview of the current crisis
As always, Woods spells it out, without getting too wordy.
In this wonderful book, he is able to give you an overview of what the followers of the Austrian School of Economics have been saying for decades. They were the only ones to predict this happen, and the only ones to give a consistent explaination for the current crises.
He tells the story from a economic, financial AND moral standpoint, and provides deep insight in the fallacies of governmental polity.
In the line of Rothbard, Mises and Reisman, he explains the interworkings between the economy, foreign policy, financial institutes and human interaction.
This is a must read for anyone who feels that something is wrong on a more fundamental level than just policy gone bad, but is not able to fully grasp it. Salvation lies within.
Test Concepts, Ltd.
The Netherlands....more info
- Right on the Money
Thomas Woods Jr. is right on regarding the state of our economy and markets. The book is well written and well documented. It is unfortunate that most of the sheep that comprise our population will not read or understand what Mr. Woods is presenting. After reading the book all I can say is God help us....more info
- Economy Lessons for Dummies - And For Those Who Think They Aren't
Once again, here comes the government to interfere where the natural order of things is supposed to behave. Which consequences should one expect when it's known that government agencies allies with banks to artificially create money out of "thin air" in order to stimulate consumption and therefore a false sensation that economy is up and running? Calamitous, of course, to say the least.
Put together a bunch of false specialists in the media to say whatever they understand to be true, and the result is an universe of confusion and misinformation for the general public.
Thankfully, Thomas E. Woods, Jr. does an excellent job in approaching through a simple language what the reason for the current meltdown is (money manufacturing, government control on interest rates and their partnership with the financial and the quasi-government institutions which lacked responsible credit analysis - action stimulated by this same government) and the true concept of economics. Production, and not money, is the real indicator of a wealth economy. Without production, there is no consumption. Without savings, there will be no conditions to invest in a more productive economy.
The message is loud and clear - bubbles inflated with artificial money are to burst someday with serious consequences to the market, so while government control and speculation exist, there will always be a meltdown ahead of us, sooner or later....more info
- Fantastic book, it's a must-read
I majored in economics 20 years ago and now I work in finance. Woods has hit the nail right on the head. ...more info
- The truth about the economy
If you really want to know how our economy works and how government policies and the federal reserve screw up the free markets this is the book for you. Austrian economic theory and historical observations show you that what is happening to the economy now has happened before and what the causes are and what the real solutions are. This should be required reading for every senior in high school and everyone who votes. The boom and bust cycles of our economy will stop once the voters know the cause and remedy which this book shows and tells. Parents need to make sure their kids at some time read this book, and we the voters need to insist that our elected officials read this book and wise up! Just ask yourself one question. How can a Government that is in debt (or anyone) get out of debt by incurring more debt? That is exactly what today's government (who work for the people) is doing and they call it a stimulus package for the economy and it is necessary to bring us out of a recession. It can't work! It won't work! It will make things worse! The laws of economics are just as absolute as the laws of physics. You can try and cheat them but eventually the chickens will come home to roost. You are now seeing it unfold before you. Knowledge is power!...more info
- Meltdown Delivers Solid Useful Economics
For anyone who wants to learn more about why we are in the current economic mess, Meltdown provides some wonderful information. If you have not heard of the Austrian School of Economics, you will find it is very relevant to the current situation. Don't roll over and listen to the nonsense from the mainstream press and politicians; read this book to really understand the the causes of the current crisis....more info
- Thomas Woods is a staggering genius!
Thomas Woods gives a concise, clear account of how the Federal Reserve system is, and has always been, responsible for the economic pitfalls confronting America.
For anybody who is still in the dark about the Federal Reserve (who they are, what they do, why are they so secretive?) this book will explain it. Austrian Economics has been correct time and time again, and this book is no exception. Who should you listen to? Keynesians like Bernanke, Paulson, and Geither? Remember when Paulson said "The fundamentals of the economy are strong"? WAKE UP PEOPLE!
It's about time we get our country back on track, but before that can happen we need to educate the citizens one at a time. This book will help us accomplish just that.
As always, Thomas E. Woods Jr. has given us an excellent, concise, well written, very didactic, easy to understand, even entertaining book. Everybody should read it, and pass the good word around.
Like in The Church and The Market, the author uses the book's subject to give us a concise, simple, never boring explanation on such topics as the origin of money, interest rates, the School of Vienna, and in a way, how people (and therefore the world) actually think and act.
Even those who are not naturally attracted by those subjects should read this book, for it is very good at making simple, easy to grasp, and entertaining matters that have a direct impact on our lives. ...more info
- My Take
Good thumb nail of von Mises school of economic thought. Attempts to point out how current economic problems came about and what has been tried in past to fix depressions and recessions. Tries to make the case that if past and future solutions had been based on Austrian Scool of Thought, everything would be better. Not 100% successful in that endeavour....more info
- What An Eye-Opening Book!
I had never heard of the Austrian School of economic theory prior to reading this book. What an eye-opening book this was! I'm a 54 year-old Engineer and this will be the first book I have ever deemed worthy of reading twice. Too bad that our Government does not want to believe in diversity of thought regarding economics. Instead they would rather continue to print money and extend credit in order to try to win votes and gain more power....more info
- Against the Grain
The author states, "A book of this length (158 pages) cannot, and is not intended to, answer all questions or objections. It is a starting point on the road to further reading and learning." That said, this short book is an excellent introduction to economic theory and a challenge to learn more about the significance of economics in our day-to-day lives.
The beginning of the book is an eminently readable explanation of the causes of the present stock market collapse. There are a lot of "bad guys" whose greed fueled the disaster. It is easy reading. On the other hand, the easy reading is followed by a fairly technical discussion of theoretical economic concepts. The reading of economic theory is not nearly so easy as the targeting of the people who promoted subprime mortgages for their own personal profit. Similarly, the discussion of the Great Depression is not as exciting as the introductory comments to the present economic situation.
Toward the end of the book, the discussion of the function and the purpose of money is presented in an interesting and understandable way. In this part of the book, the focus of the discussion is sharpened. Does the Federal Reserve Bank serve its purpose? Do we fail to critique the performance of the Fed? The author argues that the Federal Reserve is part of the problem that creates a defective economic situation. Do we buy into the concept that the Federal Reserve System is beyond reproach?
This book is a cry for greater understanding of the principles that are so important to the decisions of the present economy. The book does not pretend to be the answer to the present crisis. Rather, it is a plea that all of us take the time to become more familiar with the realities of the monetary system. It is a good start.
- Great explanation of the current economic situation
The book explains how we came to the current economic situation and how the government and fed are actually making it worse rather than better. Much of what is presented is common sense - you can't make 700 Billion dollars out of thin air and bailout sick companies and expect that to fix things. It's interesting to see people say that the current economy shows the failure of capitalism and the free market when the government has really intervened in both and not let the market regulate itself. We're definitely in for some interesting times ahead if the government and fed don't leave the economy alone....more info
- Their "Meltdown" - but Our Chance to Re-Shape it.
On Saturday, May 23 2009, the Drudge Report informed us of what they said was a "sobering holiday interview" with C-SPAN. It said, Steve Scully broke from a meek Washington press corps and asked the President, "You know the numbers, $1.7 trillion debt, a national deficit of $11 trillion. At what point do we run out of money?" President Obama boldly told Americans: "Well, we are out of money now. We are operating in deep deficits ... So we've got a short-term problem, which is we had to spend a lot of money to salvage our financial system, we had to deal with the auto companies, a huge recession which drains tax revenue...." You can easily read the rest yourselves.
The question so many of us Americans have is, "Well, why do we keep spending?"
I believe that, as a people, we are quickly getting fed up with these answers and the increased spending, neither of which has produced favorable results. Although many might not be able to fully articulate it, most Americans do not feel the country is going in the right direction. The Rasmussen Reports confirm this. This strongly suggests that their representatives in Washington are not acting in their best interests and those of the future generation(s) that will have to pay for this mess.
Where does a people, who do not grasp the essence of economics, go to begin to learn the essentials and the language and the issues necessary to speak their mind? One place to start is with Thomas Woods' new book, Meltdown. It is written for the majority of us who are not experts and have no training in this area. In a Book Review by The New American Magazine, author Charles Scaliger addresses the matter succinctly, "Economics a hot topic in Meltdown: today's hard times are prompting people to learn more about the forces that drive our economy, and Thomas Woods' Meltdown offers an entertaining way to do just that."
Just for instance, take the matter of "spending" and what it does. Woods embraces things which we have held sacred, like the Federal Reserve, and gives us an education on spending, printing money and interest rates. He concludes that the Federal Reserve bears a large part of the blame for the mess we're in. He sketches the boom and bust cycles that we've experienced in a very understandable way. He shows how government policies and its intervention "create" climates that lead away from recovery, continuing to worsen rather than stimulate the economy.
Woods' ideas are not original, but his presentation of them very good. They come down to us from well-known names in the Austrian School of economics and the thoughts of Ludwig Von Mises (see his work, Human Action: A Treatise on Economics) and Hayek. Disciples of theirs are not lacking, like Ron Paul and Woods himself. I said "well-known," but they were new to me, and may be to you. They are worth looking into. It shows why Ron Paul had such a vibrant following in our 2008 election. It's a pity that too few of us knew what his real message was. It has forced me to go back and read his pre-election book, The Revolution: A Manifesto. It was hardly a waste of time. Just look at the reviews he has received on Amazon.
I was not a stranger to Thomas Woods. I found and read his book, How the Catholic Church Built Western Civilization, about 4 years ago. I believed it was based on excellent scholarship. He was reporting facts, many of which, I was already familiar. I could trust him. This same intellectual approach underlies his writing of Meltdown.
If you are like me, you feel that you need to be re-educated to take a position in our country's future. As far as economics is concerned, Meltdown is a good place to start.
- Understand what's becoming of your liberty---and your money
Thomas E Woods does a marvelous job explaining the repeated folly of government intervention in general, and the monetary tyranny of the Federal Reserve in specific. Woods' book helps ordinary Americans wrap their brains around the dynamics responsible for our economic crisis. He does so with easily understood examples and brilliant reasoning. Great book! ...more info
- Informative, Important, Imperfect
This book by Tom Woods is well done. It is certainly informative in terms of what is currently taking place in the United States economy. No doubt, it is important relative to its description and analysis of these critical matters. But, in the end, it is far from perfect.
Woods provides an overview of the current sorry state of the US economy from the unique and important perspective of Austrian Economics. For those unfamiliar with this very important, though sadly neglected, school, an analogy might do to put the Austrian system in context. Where Marxist economists would hold that there is no God, Austrian economists would probably reply that there is most certainly is a God. He is the market. That simplifies matters, to be sure. But there is more than a grain of truth in it. And here we have the rub, as it were, with this book. In descriptive terms, the Austrian school does a fair job of explaining where we are and particularly how the Keynsian foolishness now advocated by American elites simply will not work. However, Austrian economics and this representation of it by Woods fails, in my view, in its attempt to define what ought to be done.
At the heart of Austrian theory is the notion of praxeology, the study of human action. But the most full blown explication of this theory in Von Mises' "Human Action" pretty much neglects any influence of morality on human action. And this is a gaping hole, in my view. One could make the following case, to be sure: We have Marxian Economics where class matters. Later, we were cursed with Keynsian Economics, where government spending matters. We have, of course, the Monetarists, for whom control of the growth of the money supply is what matters. And, we have Austrian Economics where the market matters. Isn't about time we got around to studying a system of economics as if God mattered? In my humble opinion, it certainly is; because He most assuredly does. Perhaps this is a broad hint to the Austrians: Return to your scholastic roots. You'll find the real and imporant answers there. God bless....more info
- If you truly want to understand, then read
It could not be any easier to understand than this. So, if you truly want to know why our economy is in such a mess and what we need to do about it, then read "Meltdown." ...more info
- A Perfect Explanation for the Crash
Most economists say our current economic crisis was caused by deregulation. Most economists are wrong.
In Meltdown, Thomas Woods explains that the United States economy has been nothing close to free-market capitalism.
It was excessive spending, regulation, borrowing, taxation, and inflation that caused our problems. Therefore, the popular notion that we need to spend more, borrow more, regulate more, and print more couldn't be further from the truth.
In this short but informative book, Mr. Woods explains not only how we got into this crisis, but also how we can get out of it.
I recommend this to all....more info
- a little disappointed
I looked forward to reading this book because I had heard great reviews on a few radio programs. The subject matter is very interesting, and the book is indeed informative and increased my understanding of the Fed. However, I felt the level of information just barely went below surface level. I wanted more in-depth explanations.
An author's writing style greatly affects my enjoyment of any book, and Woods' sentences were sometimes awkwardly constructed, and he used sentence fragments now and then. What really bothered me, though, is that throughout the book Woods kept bringing up subjects and then saying he would explain them later on in other chapters. Consequently, by the end of the book, I didn't feel that anything was fully explained. I do recommend this book though, because Americans need to understand economics. Most Americans, including politicians, know nothing about economics or know only Keynesian theory....more info
I am not sure why it is, but most American's seem to have forgotten what this book puts in plain English; America is a Free Enterprise economy. I learned this in grade school economics class, but it appears it is no longer taught and our political leaders really don't want to recall what makes this nation so great; supply and demand. This book is a good read, if nothing else to remind us of the hazards of government intervention. I, for one, am tired of paying for other peoples mistakes and I won't go into my feelings about our so called elected officials who are supposed to represent us....more info
- Excellent for all readers
If you are an Austrian economist, you will already know much of what Woods is talking about, but nonetheless it is a great, quick read. Im a fairly slow reader, but this book went by in only a couple days.
Im so glad that someone came out with a book on the REAL causes of this economic collapse. He is the only one that points out the real culprit in this mess, the Federal reserve. Along the way he goes through a quick run-through of the Austrian business cycle theory, and also speaks shortly about The Great Depression, the lost decade of Japan, and the Depression of 21. I highly recommend this book to all people. ...more info
- Understanding these contents is critical
"economic history is a long record of government policies that failed because they were designed with a bold disregard for the laws of economics" -Mises...more info
- Great Book
Meltdown was an informative and fun read. Woods provides a well reasoned and detailed account of the causes of our current economic crisis. Thus book is a MUST READ. I am buying copies for friends and family....more info
- Read this to understand the financial problem & solution
Very impressed with the background research. The author does not waste your time but gives just the right amount of proof for his conclusions....more info
- Great Overview of the Bailout of 2008 and Sound Money
If you want a quick overview of the reasons of the economic downturn and the reasons why, get this book. If you want an overview of sound money, get this book....more info
- We are all Keynesians now---NOT!
One cannot improve on the review of this book, which is the introduction by Dr. Ron Paul. Woods, in a short space, unravels the fibers of this "crisis not to be wasted", which the experts on CNBC can't seem to get their minds around. He stands proudly on the shoulders of Mises, Hayek, Rothbard et al and sees the hard truth.
Whether it be Fed Reserve quantitative easing, Fannie and Freddie's shenanigans, too big to fail(the Greenspan Put), moral hazardous mortgage modifications, etc.; Young Tom explains why the government cure does nothing but harm the patient. It's the Fed, Stupid!
A truly topical discussion point is the explanation of the Panic of 1907. It is the Panic that apologists for The Fed use as justification for the "lender of last resort". After having read it carefully, I understand better the Rothbardian conclusion: the Fed issues prolonged and nationwide recessions and depressions; in order to avoid the brief and regional effects of bankruptcies. That's its quintessential task.
I admit this was a slow read for me, because it is disconcerting to be shown how easily this boom and bust could have been prevented.
In a nation in which envy is a virtue, this book is a must read. Alas, one more thing Keynes was wrong about: in the long run, we weren't all dead. Some of us are alive and not so well in WhimBamWay.
- An Easy Education in Economics
Meltdown by Thomas Woods. A superb, understandable analysis of the causes of the current economic crisis and the effects of the government actions taken to solve the problems. ...more info
- The Real Story
Complete and thorough analysis of the current financial crisis. Very thought provoking. Explains what the politicians are not explaining....more info
- The Truth Speaks
A book has never made more sense, or have brought clarity to the "wtf" that just happened to the economy. Uses layman's terms, but depending on your knowledge of the economy, you may need to do additional research. If someone is reading this review, and knows of another book that takes a different position, please let me know, and I'll read that, too....more info
- I wanted to hate this book.
I'm a libertarian and firm believer in Austrian economics, so perhaps I had a bit of foreknowledge going into this book. I enjoy Woods writing style, but the book seemed so topical to the current crisis that I was expecting to dislike it. We see so many throw-away books during the political campaign seasons that I was expecting this to be another throw-away that was relevant only to a short window of time. I can say that there were a few aspects that he threw in to try an keep it relevant to current events, but as a whole there is a lot more to this book than the immediate crisis.
The book is light overall, glosses over a few things and repeats a few ideas for what seems to a bit of padding to the length. However, I must say that it was well researched with a lot of quotes and factual analysis. He notated and sourced nearly all of his facts, topped it off with an index for easy reference to specific points. These additional features really turned this into a 5 star book for me. Despite it's brevity, it's something I have referenced back to a few times already, since it hits a lot of the major points that are debated today.
This book isn't perfect and it's not the end all be all to understanding Austrian theories, but it's a damn nice start. I have seen the author respond to a few comments here and I would suggest that for his next book, that he repeats the extensive notion style and indexing as he has done here and I'll be a fan of his for life....more info
- Will earn a place in any general library strong in economic analysis
MELTDOWN: A FREE-MARKET LOOK AT WHY THE STOCK MARKET COLLAPSED, THE ECONOMY, TANKED, AND GOVERNMENT BAILOUTS WILL MAKE THINGS WORSE presents the real issues behind the collapse, pinpointing Washington attitudes, politics, and decision-making processes likely to be made worse by federal bail-outs. Woods is a senior fellow at the Mises Institute and here explains how government intervention in the economy created the ills it now tries to cure. An intriguing survey of cause, effect, and economic philosophy, this will earn a place in any general library strong in economic analysis.
- Dogmatic and flawed analysis
Book blames entities and government programs which operated successfully before the boom and bust that caused the current financial meltdown and totally ignores the new deregulation and risk financial practices that caused the Meltdown. Wood blames Fannie Mae, The Community Reinvestment Act (Carter Admin program), The Federal Reserve interest rate policy, Tax laws credits for homeownership, and government (Keynesian) spending policy that stimulate the economy. All which existed before the several business cycles before the current business cycle meltdown. Woods discounts without any defense sub-prime mortgages which is a documented and known contributing cause to the meltdown. Woods rails at banking regulation as the cause of the meltdown when the MAIN CAUSE for the bank ing failures in the financial meltdown was the elimination of the banking regulation that required investment banks to maintain a certain percentage of their assets in safe liquid assets (e.g. T-bill ) instead of swap-equities. Woods dogmatically argues for no-regulation free market ayn rand financial policy without regard to the human misery and economic chaos. The meltdown is a failure of the commons. By ignoring the evidence and holding on to economic dogma Woods becomes yet another frog who doesn't realize he is being boiled alive. Wood's meltdown solution is one of laissez faire - let the business cycles come crashing down and the withdrawal of any government controls in the banking industry. However, it was the governments elimination of controls in banking industry that lead to the financial meltdown. ...more info
- Timely & Insightful
I heard about this book on "Free Markets With Dr. Mike Beitler," a libertarian internet-radio show. Woods' insights are very timely. He is right; we should abolish the Fed and return to real money backed by gold. I recommend his book along with Beitler's Rational Individualism: A Moral Argument for Limited Government & Capitalism. If you are interested in freedom buy both of these books....more info
- Good Information, but too pushy
Meltdown gives the average reader an insightful, free-market look into the current recession. The book flows fairly well from one topic to another, however, the author's condescending attitude towards mainstream media and economists lowers the overall standard of the read. Woods does do a good job of presenting his case to the reader, using adequate historical references and connecting them with the causes of the recession, however, he is incredibly pushy when makes suggestions and over quotes Von Mises (after the first few chapters "according to Von Mises.." and as "Von Mises said" gets old)....more info
- A Book Worth Reading
Other reviewers have already made quite concise summaries of the argument this book present. I merely restate their belief that the ideas contained in this book are worth reading and understanding.
A MUST READ, ESPECIALLY NOW!...more info
- I wish Congress and the President would read this book
Every politition braying about spending our way out of the crisis we are in needs to read this book. The examples used in the book to explain basic economics are wonderful. Simple, yet powerful. I loved it....more info
- Read This to Understand the Financial Crisis
The best place to start for understanding the economic crisis. Woods draws attention to the "elephant in the living room," the Federal Reserve, which is left out of the mainstream discussion of the current financial crisis. Woods explains the Fed's role in creating and sustaining the boom leading up to the current inevitable crash. The book cites the Fed as the major problem, but also explains the roles of other culprits including Fannie and Freddie, "deregulation," the US tax code, and the Community Reinvestment Act. Woods critiques the Bush and Obama administration's responses to the crisis and offers radically different prescriptions for change. The book is interesting and readable for anyone and makes complex issues understandable for the layman. ...more info
- A Brief Look at What Austrian Economics Predicts for the U.S. Economy
Send a copy of this book to your congressman, senator, and the president along with a large campaign contribution. It's your only chance for economic revival!
Meltdown is the most useful book I've read about the great economic crisis of 2007-?. Unlike the politicians, the media, and the people who comment on markets, Meltdown points out that the current Obama program of massive bailouts and public spending will make the economic situation worse rather than better. In fact, President Obama runs the risk of becoming a new Herbert Hoover as he energetically follows the failed policies of that unpopular president.
What's the point that Austrian economics makes about our situation? When the economy tanks, the free market will quickly direct scarce resources into productive areas where there is plenty of demand for more. If the Federal Reserve and the Federal Government intervene, lots of money will go to those who make the biggest campaign contributions . . . permitting those who made a lot of bad decisions to make even more. Areas that could become more productive will be starved for capital while areas that are already unproductive will get more . . . wasting the resources.
What's the choice? Let the politicians and the Federal Reserve mess around and prolong the agony for years . . . or let the shoes drop where they may and enjoy a quick rebound (albeit following a more rapid drop in prices in the intermediate term).
Most of the book outlines the foolish mistakes that Democrats, Republicans, and the Federal Reserve made that got us into this mess. Most of that probably won't surprise you. ...more info
- Layman's book to understanding the "meltdown".
This is the first book I read by Tom Woods and was very pleased with the read.
The only explanation for the recent financial crisis we have been given from politicians is that it was caused by the greed of a few. Opposition opinion has been non-existant. However, what can we expect with opposition leaders like George W. Bush and John McCain, whose intellectual capacity is equivalent to that of a block of cheese.
Few have bothered to ask how greed translates into economic terms. One would think this would be an assumption in an open and honest discourse. If the explanations of our leaders are to have any integrity at all, it is important that they explain how this greed translates economically, as economics is one of our most important social studies.
In this book, Tom explains the real causes of the recent crisis in economic terms that even the layman can understand. The text is thoroughly explained and well cited. The part of the book I found interested was Tom's examination of the causes of economic bubbles from a historical perspective. Tom showed how these bubbles continually reoccur due identical causes to which we turn a blind eye.
Meltdown was a fairly quick, eye opening read. There are many hard hitting facts that will make any open minded person in pursuit of the truth question the explanations they have been given....more info
- Economic Clarity to Understanding the complex
Extremely well written. Clear and concise makes what has happened to our economy understandable....more info
- If only our president would read this book
To be sure, I am a long-time devotee of free market economic theory and believer in capitalism, and I have read numerous economics books surrounding these ideals, so nothing in Meltdown was particularly new to me per se. That said this book was excellent, makes an irrefutable argument that government and the Fed need to leave the economy alone.
Now only if our president would read it......more info
- Tom Woods: Let's Try Free Market Economics
March 23, 2009
BOOK REVIEW: 'Meltdown' Author: It's Time to Scrap 'Mainstream' Economics That Won't Work in Favor of Austrian School, Free-Market Approaches
"Those who cannot remember the past are condemned to repeat it." -- George Santayana, 1905, "Life of Reason, Reason in Common Sense"
By David M. Kinchen
Santayana's aphorism could be applied to the myriad of TARPs, bailouts, stimuli and other programs now being put into place by the federal government to solve the worst financial meltdown since the Great Depression, in the view of Thomas E. Woods Jr., author of "Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse" (Regnery, 194 pages, plus three-page foreword by Rep. Ron Paul, R-TX, $27.95).
Woods argues persuasively in this slim book that government intervention in the past -- including both Herbert Hoover's and Franklin D. Roosevelt's response to the 1929 stock market crash -- only prolonged the Depression. He points to the 1920-21 post World War I recession -- a "forgotten depression" that he says was worse than the current one -- which ended without the frantic moves by the Federal Reserve system that characterize the current recession.
He writes: "Not surprisingly, modern economists [translation: mainstream, Keynesian economists] who have studied the depression of 1920-21 have been unable to explain how the recovery could have been so swift and sweeping even though the federal government and the Federal Reserve refrained from employing any of the macroeconomic tools -- public works spending, government deficits, inflationary monetary policy -- that conventional wisdom recommends as the solutions to economic slowdowns."
A devotee of the Austrian School of economics and a senior fellow at the Ludwig von Mises Institute in Auburn, Alabama, Woods, who has a Ph.D from Columbia University, says that if you believe in the free market, you cannot support the Fed, "one of the most intrusive interventions into the market." Before the Federal Reserve Act was passed during the Wilson Administration in 1913, free market economic approaches limited panics, depressions and recessions to relatively short durations, Woods argues -- and he supplies succinct descriptions of past meltdowns.
If you don't want to go all the way back to 1920-21, how about what the Japanese call the "lost decade," the period of the 1990s when the Japanese government used all of the approaches we're told are necessary in the U.S. to spend the way out of a similar meltdown, driven by many of the same elements, including a massive real estate bubble.
"Ask Japan how their trillions of yen economic stimulus packages worked for them," Woods says. "They still haven't recovered from their government's intervention 18 years later." Interventions in Japan included pouring more concrete to build unneeded roads than the U.S., in a country with a fraction of the land mass of the U.S. and less than half the population.
What the heck is the Austrian School of economics? Wikipedia says: "Austrian School economists advocate the enforcement of voluntary contractual agreements between economic agents, but otherwise the smallest imposition of coercive force (especially government-imposed) on commercial transactions.
"Although often controversial, the Austrian School was once influential dating back to the early 20th century...The Austrian School derives its name from its predominantly Austrian founders and early supporters, including Carl Menger, Eugen von B?hm-Bawerk and Ludwig von Mises. Prominent Austrian School economists of the 20th century include Joseph Schumpeter, Henry Hazlitt, Murray Rothbard and Nobel Laureate Friedrich Hayek... The Austrian School now lies outside the mainstream."
Lying outside the mainstream is no problem to Woods, author of "The Politically Incorrect Guide to American History" and a senior fellow at the Ludwig von Mises Institute in Auburn, AL.
By following the principles of "mainstream" economics -- he has particularly harsh words for New York Times columnist Paul Krugman, a mainstream economist at Princeton University -- the government and the media created the myth that people should not question the government's response -- whether it be the Bush Administration's rushed through bailouts of last summer and fall, or the current Obama Administration's trillion dollar measures -- but leave it up to experts, Woods says.
Perhaps the most radical proposal in "Meltdown" is Woods' suggestion that the Federal Reserve system should be scrapped, along with government involvement in mortgage institutions like Freddie Mac and Fannie Mae. He is supported in this by Ron Paul, who writes in the foreword: "The Federal Reserve and its manipulation of money and interest rates have failed."
Woods says: "If you believe in the free market, you cannot support the Fed, one of the most intrusive interventions into the market. If you believe in the free market, you cannot support central planning of money, the very lifeblood of the economy. If you believe in the free market, you cannot support government price-fixing, including the fixing of interest rates."
Speaking of money -- and it's particularly appropriate in light of all the gold and silver promotions seen on TV commercials these days -- Woods would like to see a return to gold and silver as a basis for money. No, he doesn't want a return to the gold standard that existed in the U.S. prior to 1933; instead he wants gold and silver to be one of the choices people in a free market economy can select. Already, he writes in his chapter on money several institutions marketing precious metals have issued debit cards -- what most people use nowadays anyway -- to access the gold or silver they own.
Woods quotes free-market economist Henry Hazlitt, who "in saner times wrote editorials on economic topics for the New York Times": "The tremendous merit of gold is, if we want to put it that way, a negative one: it is not a managed paper money that can ruin everyone who is legally forced to accept it or who puts his confidence in it. The technical criticisms of the gold standard becomeutterly trivial when considered with this single merit."
The ideas in "Meltdown" will sound extreme to anyone immersed in mainstream, Keynesian economics, but supporters of the Austrian School can justly say that if a system doesn't work, it's time to consider alternatives. After all, one definition of insanity is doing something that has failed in the past, expecting a different result this time.
"Meltdown" is a jargon free, mathematics formula free approach to a form of economics that makes sense to people, once they read about it and learn its principles. Woods provides a list of resources in his book, which includes notes and and index. As a supporter of libertarian economics -- and someone who would like to see Fannie, Freddie and the Fed disappear -- I recommend this book without reservation.
- A good explantion of asset bubbles
This is an explanation of the recent economic crash in terms of the capital model of F.A. Hayek and Ludwig von Mises, collectively known as the Austrian School. The basic argument is that money created by a central bank, our Federal Reserve, without backing by a real commodity such as gold, must inevitably lead to inflation of capital assets. In this case it was residential housing, but it could have been internet stocks, railroads or tulip bulbs. In the recent case, the money injection started in 2000, and was accelerated in 2001 after 9/11, both times with the objective of avoiding a recession. The bubble built up a few years later and only recently burst, as it must.
The infamous Community Reinvestment Act, complex derivatives, and fractional reserve bank lending are all shown to have contributed, but the driving force is central bank fiat money. In short, "Creating new money doesn't create any new stuff."
The argument that the US suffered violent economic cycles in the laissez faire markets of the nineteenth and early twentieth centuries from which we have been spared by the wise actions of the Fed and counter cyclical federal spending is demolished in two ways. First, these periods were characterized by frequent overzealous lending of fiat money, sometimes by private banks, sometimes by banks set up by the government, and it doesn't matter who creates the bogus money. Second, much of the economic history of the period is stated in terms of nominal dollars, and in some periods, when the money was actually stable while production increased, nominal prices fell, as they must. Even though everyone was becoming richer in terms of real goods, the nominal values seemed to be declining, so the period was reported as a depression.
Some of the hoary myths about the Great Depression of the 1930s are debunked. First, for political reasons, the whole thing is blamed on the laissez faire policies of Herbert Hoover. This is exactly wrong because Hoover was in fact an economic activist, which is how he contributed to the problem. An earlier recession, in 1920, could have been as bad except that the government then let the economy correct itself, and we never hear of it. The claim that World War II and its massive government spending was what lifted the country out of depression is false because the apparent prosperity of the war period is a result only of the nominal gross domestic product, which included production of war material, rising while wartime restrictions prevented real people from buying freely. After the war, even though total GDP fell, real people in the private economy experienced one of the great growth spurts of history.
Explanations of past economic history are the strong point of the book, and by extension, of the Austrian School of Economics. When it comes to prescriptions for future policy, they are rather weaker, though promising. The basic policy prescription is to abolish the Federal Reserve Bank and let private banks issue their own monies, which would compete in an open market. The best money would be based on a real commodity such as gold. Since the amount of gold available would probably not keep up with a growing world economy, nominal prices would fall. In principle, the Austrians claim, this shouldn't matter because all incomes and prices would fall together, just as in the case of inflation they should all rise together. Either way, though, long term planning and contracts are made more difficult than if the value of money can be made stable.
The political problem with a "real money" policy is that in a period of falling prices lenders befit, while in a period of rising prices borrowers benefit; and there are more borrowers.
Even with the weaknesses noted here abut future policy; this book is a very readable and sound explanation of our current problems, and is a good beginning for a discussion of new policies to avoid such problems in the future.
- Read the Prequel first
This is an excellent analysis of the Millennial Meltdown from the point of view of the Austrian school of economics (Von Mises, Hayek). To get a really in depth understanding of how we got into the current economic/financial catastrophe, read The Dollar Crisis: Causes, Consequences, Cures , Revised and Updated first. Taken together they present an in depth description of the unfolding of events, economic errors and warning signs that have culminated in the terrible situation we are facing today. Unfortunately there is no easy way out and the path ahead is rife with danger (See The Fourth Turning, esp. chapter 12)....more info
- Obama.... the next Jimmy Carter (only worse)
Clearly illustrates why Obama, aka "Jimmy Carter Lite - only less filling" is going to destroy the economy. ...more info
- This is one of those books You say PLEASE READ!
This is such simple stuff! How come the Media ignores this! This is a Must read if you vote in the US elections. Every Congressman and Senator should have this book at the top of their reading list. Read this book and then see if you don't want to send a letter to your representatives asking them to Please Read. ...more info
- The Most Important Book of the Year
"All the perplexities, confusion and distress in America rise, not from defects in their Constitution or Confederation, not from want of honor or virtue, so much as from downright ignorance of the nature of coin, credit and circulation." So wrote John Adams in a letter to Thomas Jefferson in 1787.
If Adams' comment was relevant in 1787, it is ten times more so today. Woods does an excellent job of explaining the mechanics of a sound monetary system, how the USA lost its way, why this crisis was predictable and inevitable, and how we can avoid another like it. By the time you are done reading this book you will realize why it is that Ludwig von Mises wrote in The Theory of Money and Credit in 1912: "Ideologically [sound money] belongs in the same class with political constitutions and bills of rights."
Woods' sound thinking stands in sharp contrast to 99% of the non-sense that permeates the mainstream media. On May 12, 2009, The Financial Times published a special insert entitled "The Future of Capitalism". In it, 16 "experts" debate what went wrong and what comes next. Nowhere in the 47 pages of fine print is there even a mention of the elephant in the room that has caused this mess: the government monopoly of money and credit via the Federal Reserve System. President Andrew Jackson must be doing summersaults in his grave....more info
- I Didn't Learn This in College
The "Austrian School" of economics deserves more respect and exposure. We have placed the chairmen of the Federal Reserve on a pedestal and even called one of them "Maestro." After reading Meltdown, the pedestal collapsed as if it was made of sand. This book challenges assumptions that should be challenged....more info
- Ponzi - like scheme created by government's meddling.
Great book, written so that most people can understand with eye-opening consequences and it answers the questions about how this economy collapsed.
Greed, Wall Street, or whatever couldn't explain why all of a sudden greed was given free rein and why the collapse affected everyone at once. Remember the past, when a bank or business that failed, by not making financially sound decisions, only hurt a very small localized group, and remember when it wasn't so easy to get a home loan or credit card unless you passed all the strict guidelines and there also were financially sound limits based on your income.
The economic bubble was and is like a national and international Ponzi scheme (because it was based on the artificial and manipulation) created by government and politicians meddling, They don't have a clue about business or economics,don't have monetary/budget limits and care more about their special interests. Some meddling was due to good intentions, but the results were horrible for even the original people they were trying to help.
What happened to the investment advice of not putting all your investment eggs in one basket? That is what government did, and is still trying to do when they want to nationalize or globalize things. It's very scary, because it allows failing policies to affect a greater amount of people and countries and allows dictators or groups of them to easily take over the system that already has been put in place by the idiots currently in charge. The idiots are our government, the U.N., etc.
I also recommend the book: The Housing Boom and Bust
Don't let the mainstream media keep you ignorant or misinformed....more info
- Excellent analysis of the recent economic bust for the layman.
'Meltdown' presents a serious analysis of the boom-and-bust economic cycle and ties it with the actions of government and in particular the Federal Reserve. It is a great introductory to a different view than the mainstream thinking. It poses serious questions which I only hear from a few colleagues but not the mainstream media. It presents a framework for the ultimate cleaning up of the drowning economic mess.
As a teacher and researcher in engineering with side interest in economics and politics I find this book revealing. It is clear to me that politicians and economists try many different things to engineer the intricate economic machine of our time, often without the people's consent, whereas most of the politicians and economists know very little about how the machine works. Like in all scientific fields, a majority of scientists understand tiny fractions of the field from their limited research endeavor. It is unfortunate that so many different things have been tried in the past in the name of saving the people with meager and often negative outcome. Perhaps those higher ups should not be allowed to engineer the economic machine of our time. Until economics become as clearly logical as computer science, economists should perhaps stay scientists and not venture to engineer the system in massive scale on our behalf....more info
- Precious !
After reading this book, you will know the free-market is not to blame for the current financial crisis because its ultimate causes lie elsewhere: bad politics and the mess created by the Fed....more info
- can't see the forest for the trees
Makes a case as to why we do not need professional politicians. It's
much harder to do what must be done than to get re-elected....more info
- Great work
There have been many glowing reviews, so I won't rehash the points made in them here. I will only say that Dr. Woods has really pulled together a lot of great information and arguments in a short book and explained some difficult concepts in plain, yet exact language. He has done his homework over the years and with respect to the current crisis and it shows.
I have a couple quibbles which are minor in the scheme of things but should be considered if the book is updated down the road.
There is a great emphasis on the culpability of the Fed, as there should be. Yet the more fundamental problem is fractional reserve banking. Central banking compounds and exacerbates the problem greatly, but is not the core problem. This issue is addressed but one could miss it with so much emphasis on the Fed.
In the section on Deflation, there is a point made which seems to contradict an argument made earlier. Woods seems to be saying that entrepeneurs can anticipate a contraction of the money supply in their pricing, yet earlier he argued that, for various reasons, entrepeneurs cannot simply compensate for the effects of inflation in their calculations in the boom phase.
That said, these are small issues in relation to what is a truly excellent and important book. It is a must read. And the intellectual honesty (and non-partisanship) that pervades it means that both liberals, conservatives, and others will profit from reading it, rather than seeing it as simply an exercise in preaching to the choir or in gratuitous bashing of one's enemies....more info
- Great book
I didn't know much about the economy. Like many Americans I'm fed up with the lack of jobs out there and financial uncertainty. This book looked good, so I picked it up, hoping for some answers. It really blew me away. I had no idea how much the government manipulated the interest rates banks set, how they inflate the money supply and how those actions can - in theory - be bad for the economy. This book does have a lot of theory in it, called the Austrian Business Cycle Theory. I don't understand it in full but basically it states that saving money allows banks to give out loans to capital projects that are the farthest removed from capital that's "consumed", projects such as mining, building, stuff like that. That, in turn, gives people the money they need to consume in the first place, and without it, we're just overspending and throwing our money into unsustainable enterprises. It makes sense. At first I was very miffed about Republicans not wanting to bail out the auto industry and rejecting both Bush and Obama's pleas for bailout packages, stimulus packages and public works projects. Now I understand why, and how there is some very good reasoning to that. Also as I read this book I became very angered at how this entire country, and most of the west in general, has always had a culture about how spending is what stimulates and economy and saving doesn't. And then the media just perpetuates the lie, not intentionally, but because that's all they have to cover -- stimulus packages and such. And now that Obama's in charge that's all we have to expect. I'm not going to rant but just say that this book was very eye-opening and if anyone wants an opinion that differs from what the media and the government has to say, then this is the book to get! I plan on reading some of the books the author recommended in the end....more info
- Explains what's going on in a way you can understand
The financial world changed forever in September 2008 when the United States government nationalized the mortgage giants Fannie Mae and Freddie Mac. Almost immediately afterwords they started printing money like it was going out of style and sticking their regulatory claws into almost every key aspect of the US economy. Why did it happen, how did it happen and what will be the effect long term? You need to read this book to find out.
Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse provided the most cogent and clearly explained case for what went wrong. It also shows why the measures our national leaders are taking to combat the economic crisis they caused will delay the recovery, cost us more freedoms and result in more economic pain than would happen if they simply went home and did nothing.
This book gives a clear explanation of the Federal Reserve, what it does and how it is largely responsible for destroying the US dollar and stealing the fruits of our productivity.
There is an excellent chapter on money and why fractional reserve banking is a bad idea. The book does a great job of explaining inflation, deflation, the need for a commodity based currency system and what steps need to be taken to gt us out of the mess we are in. The final chapter describes how we can wrest control of the economy from the socialists and central planners currently in charge and how to give it back to the free market and the people.
I you really read and understand the book you will be angry. You are being ripped off by the very people who are telling you they are rescuing you.
So the decision is yours, red pill or blue pill? Read the book if you would take the red pill. If your happier with the blue pill you best leave it alone. After all, ignorance is strength....more info
- Meltdown tells the truth about the4 economy
Meltdown tells it like it is. You see exactly who is responsible for the economic mess this country is in. The usual suspects, our government and it's meddling in the free market caused this and it's continued meddling will only worsen and extend the problem. If you want to know who, why and how, this is the book....more info
- let's let the financial system meltdown?
The author of this book suggests that we should let the major "too big to fail" financial institutions in this country go bankrupt. This is just what the right wing said before the Bush administration let Lehman Brothers do just that. The result was that the entire global financial system would have melted down without massive government support. I'm not aware of any respected economist who thinks that letting Lehman go bankrupt helped to stabilize the financial crisis. On the contrary, it is generally blamed for making things much worse.
More fundamentally, there should not be any "too big to fail" financial institutions. The fact that there are is the inevitable result of the laissez faire, market can do no wrong, mentality that our country has been deceived by ever since Ronald Reagan became President....more info
- If THIS Doesn't Make You Angry....!
Let's face it: despite many people's protestations to the contrary, too many folks have an automatic trust of government. When there is a problem, many of us don't like to think of government as the problem but as the solution. Add to that the near phobia that many have about economics as business and what do we get? Pretty much what we have now: a government going billions of dollars IN debt in attempts to get the economy OUT of debt, We get a government doing such idiotic things as bailing out companies for whom bankruptcy is imminent and buying up banks.
That is why Thomas Woods "Meltdown" is such an important book to read. If you think government is the solution, Woods will disabuse you of the notion. Government, it turns out, is actuall the problem!
Ask any Joe on the street (or, apparently, on the major news networks) what the primary cause of the current recession is. The main culprit, they say, is American greed both by producers and consumers. Rlght off the bat, economic historian Thomas Woods tells us that this answer gets it wrong. "Blaming the crisis on greed is like blaming plane crashes on gravity." (loc. 48, Kindle ed.) Greed, like gravity, begs the question: since greed isn't always accompanied by a recession (just as gravity doesn't always lead to airplane crashes), what caused the greed to lead to a recession?
Woods' answer? The government intervention in the market. In order for greed to lead to an economic downturn, a "bubble" must be created, and in order for that to happen, the market has to have been artificially manipulated. There must be too much money in the economy, and credit must be too easy to get thanks to low interest rates (thanks to the Federal Reserve). Greed doesn't cause recessions. Excessive credit, artificially low interest rates, and an overswamping of money into the economy (with greed) cause recessions.
Now, I am not one who considers economics a strong suit. I like to attempt understanding of it, but I struggle through books written by economists (but hate also to read "dummied down" primers). Meltdown was just my speed. Woods walks us through the basics of Austrian economic theory (pioneered by Ludwig von Mises and nobel laureate FA Hayek) with all the patience and care that one can expect. If you are one of the many noneconomists or econophobes wondering how the US finds ourselves in such a recession after many years of (seeming) prosperity, read this book! If you don't, you won't hear much of this eleswhere.
The only real complaint I have about this book is that despite the fact that I agree with Woods' free-market and Austrian school approach, he suggests that most economists are not in agreement with it. This prompts the question (that Woods regrettably never answers) about why! If the Austrian approach is so obvious and correct, then why do most economists see it as flawed? I wish Woods would have devoted a chapter to explaining why those opposed to Austrian business cycle theory are opposed to it (and demonstrating why they are wrong.) Long and short: what are the other explanations for the recession, and why are they taken seriously? (For this, the interested reader might read Richard A. Posner's "Failure of Capitalism.")
All in all, this is quite a timely book whose ideas need to be heard. If you think the Federal Reserve is a necessary and good system, that we live in a free-market economy, that greed was the cause of the recession, or that Bush or Obama are in any way intelligent when it comes to economics, read what Thomas Woods has to say.
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