A Crisis of Political Economy

The current state and the current banking sector require each other. They are so reciprocally intertwined that each is an extension of the other.

Remember this the next time somebody tells you, as New York Times columnist Bob Herbert did, that “free market madmen” caused the current financial crisis that is threatening to undermine the global economy. There is no free market. There is no “laissez-faire capitalism.” The government has been deeply involved in setting the parameters for market relations for eons; in fact, genuine “laissez-faire capitalism” has never existed. Yes, trade may have been less regulated in the nineteenth century, but not even the so-called Gilded Age featured “unfettered” markets.

Was Money Really Easy Under Greenspan?

Former Federal Reserve chairman Alan Greenspan has become everyone’s favorite scapegoat. His policies allegedly caused, or at least contributed to, the current financial crisis. He is attacked from the left for lax financial regulation, from the right for loose monetary policy, and from the middle for both. Yet two years ago, on leaving office, Greenspan [...]

The Subprime Crisis Shows that Government Intervenes Too Little in Financial Markets? It Just Aint So!

Start with two assumptions. No. 1: banking and financial markets are inherently unstable. No. 2: government intervention into banking and financial markets can only stabilize (never destabilize). You’ll find it easy to conclude that any period of market instability we experience, like the recent subprime-lending problem, is the market’s fault and that it could have [...]

The Current Economic Crisis and the Austrian Theory of the Business Cycle

Richard Ebeling is completing his tenure as the president of FEE. This fall he will teach economics at Trinity College in Hartford, Conn.
The current financial crisis emerged out of an economic boom that began in 2003 and saw rising stock values, increasing home prices, and high levels of employment and production. The upturn followed a [...]

Monetary-Policy Disasters of the Twentieth Century

Kirby R. Cundiff is an associate professor of finance at Northeastern State University in Tulsa, Oklahoma, and an adjunct associate professor of finance at the University of Maryland University College.
The Federal Reserve System was created in 1913 and soon did what central banks almost always do: it started printing lots of money. During World War [...]

Eye on the Ball

Like clockwork, on Aug. 28 the New York Times produced another page-one story purporting to show that living standards for many Americans have fallen, this time because wages in recent years have failed to keep up with inflation. This has been happening despite rising productivity and even taking into account the shift from cash to [...]

The Great Chinese Inflation

Inflations have undermined the cultural and economic fabric of society, bringing social chaos and revolution. One example is the Great Chinese Inflation of the 1930s and 1940s. Indeed, the destruction of the Chinese monetary system during this period helped Mao Zedong’s communist movement triumph on the Chinese mainland in 1949.
In the nineteenth and early twentieth [...]

Ninety Years of Monetary Central Planning in the United States

Richard Ebeling is the president of FEE. His latest book is Austrian Economics and the Political Economy of Freedom (Elgar).
Ninety years ago this month, on December 23, 1913, the Congress passed the Federal Reserve Act, establishing a national central-banking system in the United States. The governing board of the Federal Reserve was organized on August [...]

The Government Is the Stabilizer?

Stability is the perennial issue in macroeconomics. The economist’s judgment about the stability of the market economy stems from what Joseph Schumpeter called the “pre-analytic vision.” To illustrate the point, Schumpeter specifically used John Maynard Keynes and his pre-analytic vision: Markets are inherently unstable; the government is the stabilizer. This belief, or vision, was held [...]