5. RECESSION
One of the biggest worries of the politicians and bureaucrats is the possibility of impending recessions, with their concomitant unemployment, bankruptcies, and universal stalemate. Of course, followed by the ennui of the voters and the loss of the subsequent elections. The Misesian point of view is quite the opposite: Recessions are the necessary follow-up of the previous boom. In the latter excessive liquidity creation has caused an apparent prosperity, with business and employment flourishing, but is marred by the rise in prices and costs involved. The recession then is no nightmare, it is merely the logical and necessary consequence of the exaggerations of the boom. It permits prices and costs to fall to a sustainable level. It bursts the artificial bubbles that the liquidity has induced. It requires that the inefficient go bankrupt, that mark-to-market accounting be reflected on every balance sheet, that the truth again prevail over the fantasies of inflationism. Recessions are not evils to be counteracted. They are, in effect, the hospitalization of the economy, whereby every distortion is eliminated and every distorted element falls back into place. All prices and costs will drop to normal, and the recession will end promptly.
6. DO NOTHING = THE MARKET WAY
Contrary to the opinion that “It is widely believed the government must “do something,” as refuted by Rahn. The market means Do Nothing. The market marvelously adjusts all imbalances. If let alone, it would unfreeze the credit markets, providing the basis for new growth. It would melt down the sub-primes. It would raise the market rates of interest, thus making the credit shortage vanish. he market adjusts the relations between savings and production. If the pool of real savings is let grow (by not pushing more consumption); then doing nothing will promote recovery and various bubbles will vanish. And the new debtors will make productive the savings transferred from the creditors. The market will enrich the wealth generators. If people withdrew funds from one bank, no problem, they will deposit them elsewhere. The market will rapidly dilute the high prices as Rockwell tells us has just been the case recently: “Thus are prices being chopped from one end of the country to the other. Earnings that were $700 are now $250, purses that were $1000 are now $250, large-screen televisions that were $2000 are now $1,200, and suits that were $900 are going for $400. Deals are everywhere, from laptops to cell phones to cars.”
What would Ludwig Mises say today?
