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Government intervention fuels the crisis

Many of us in present day America have been taught to look for a government solution to any crisis (including those brought about because of earlier government interventions).

Today we explan why government "solutions" may only serve to deepen the problems or prolong these crises, with the hope that this post may serve as a useful antidote to the "save us" mindset.

I recently began reading Thomas E. Woods' recent book, 33 Questions About American History You're Not Supposed to Ask, which details and rebuts many of the popularly held notions concerning our country's political and economic development (see our post featuring author Woods' interview with the Mises Institute's Jeffrey Tucker, in which the two discuss some of the book's main ideas).

Yesterday, while reading Thomas E. Woods' explanation of how government intervention in the economy actually prolonged and deepened the Great Depression, it struck me how much of what was written in that short chapter could apply to our situation today.

Here's a sample passage from that chapter (page 178):

"The recession or depression is the necessary if unfortunate correction process by which the malinvestments of the boom period, having at last been brought to light, are liquidiated. The central bank's cheap credit policy encouraged the initiation of countless investment projects that could not be sustained in the long run. The diversion of resources into unsustainable investments that do not conform with consumer desires and resource availability swiftly ceases as businesses fail and investment projects are abandoned."

Now, as in the 1930s, instead of letting those market forces work to purge the system of those excesses built up during the boom, politicians and unelected officials (Bernanke and Paulson) are attempting to hold back the reality of market prices by purchasing "troubled assets" from banks at government-determined prices.

So when I saw this editorial from Congressman Ron Paul today, it made me glad to know someone was addressing these very issues in real time.

"Many Americans today are asking themselves how the economy got to be in such a bad spot.

For years they thought the economy was booming, growth was up, job numbers and productivity were increasing. Yet now we find ourselves in what is shaping up to be one of the most severe economic downturns since the Great Depression.

Unfortunately, the government's preferred solution to the crisis is the very thing that got us into this mess in the first place: government intervention."

Please read the whole thing, and pass it on to all who might be interested. You will not be getting the truth on these matters from most media sources. And for more, see our related posts and articles.

Related posts and articles:

1. "The Origins of the Crisis" - Mises Blog.

2. "Ron saw it all" - Mises Blog.

3. "Ron Paul Q&A w/ Ben Bernanke" (Video) - CNBC.

4. "Thomas E. Woods: 33 Questions" - Finance Trends Matter.

5. "Faber: Fed acted like a liquidity drug dealer" (CNBC) - Big Picture.

6. "Jim Rogers and Marc Faber on Paulson's Plan" (Bloomberg) - BMB.

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