Cures
Depression Cures That Don’t Work – Murray Rothbard
Following is an excerpt (pages 19-21) from Murray Rothbard’s book entitled “America’s Great Depression” written 46 years ago in 1963… “If government wishes to see a depression ended as quickly as possible, and the economy returned to normal prosperity, what course should it adopt? The first and clearest injunction is: don’t interfere with the market’s adjustment process. The more the government intervenes to delay the market’s adjustment, the longer and more grueling the depression will be, and the more difficult will be the road to complete recovery. Government hampering aggravates and perpetuates the depression. Yet, government depression policy has always (and would have even more today) aggravated the very evils it has loudly tried to cure. If, in fact, we list logically the various ways that goverment could hamper market adjustment, we will find that we have precisely listed the favorite “anti-depression” arsenal of goverment policy. Thus, here are the ways the adjustment can be hobbled. (1) Prevent or delay liquidation. Lend money to shaky businesses, call on banks to lend further, etc. (2) Inflate further. Further inflation blocks the necessary fall in prices, thus delaying adjustment and prolonging depression. Further credit expansion creates more malinvestments, which, in their return, will have to be liquidated in some later depression. A government “easy money” policy prevents the market’s return to the necessary higher interest rates. (3) Keep wage rates up …