October 31, 2011
THE FAIRY TALE OF CHEAP MONEY
Ludwig von Mises, On the Manipulation of Money and Credit: Three Treatises on Trade-Cycle Theory, translated and with a Foreword by Bettina Bien Greaves, and edited by Percy L. Greaves, Jr. (Indianapolis: Liberty Fund, 1978, 2011) ("It is vain to object that the public favors the policy of cheap money. The masses are misled by the assertions of the pseudo-experts that cheap money can make them prosperous at no expense whatever. They do not realize that investment can be expanded only to the extent that more capital is accumulated by savings. They are deceived by the fairy tales of monetary cranks . . . Yet, what counts in reality is not fairly tales, but people's conduct. If men are not prepared to save more by cutting down their current consumption, the means for a substantial expansion of investment are lacking. These means cannot be provided by printing banknotes or by loans on the bank books." Id. at 198. Americans still believe the fairy tale. And the crash of 2008 (and its continuing effects) is the price paid for their inability to be and act like responsible financial grownups.).