How the free market solves recessions quickly and how central planning often creates them and extends the pain (VIDEO)

 

We are so brainwashed with Keynesian economics, and I mean at the academic level, the investor level, and at the “man on the street” level that simple obvious economic realities now sound like sacrilege. The thing is free markets don’t create recessions, generally speaking. Usually government interventions do this (in one way or another, war was the state’s method for screwing up the economy back in the day – hey) even going way back to the dim days of history. Not only that, governments in the 20/21st Centuries, through central banks, have extended the pain of the recessions they’ve created. This was true for the Great Recession and it was true for the Great Depression.

 

 

The 1920 depression? Almost no one’s heard about it. But it was ugly. However prices were allowed to move and the government didn’t intervene. As such, as Murray Rothbard points out below, the recession was over in 9 months.

Free prices solved the problem. Wages fell. Prices fell. The market cleared the inefficient crud in the marketplace and then we all moved on.

But understanding this concept would mean that economists are not nearly as important as they think they are. (Keynesian economists that is.) It would also mean that the powerful wouldn’t be able to count on bailouts as the public would know that they were counter productive. (Don’t we though?)

 

*By the way, the prime mover of crony capitalism is the Federal Reserve. Yet many people who say they are for “the people” and “justice” defend the central bank because they simply don’t know better. 

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