Newsletters : Current Newsletters : 26 February 2010
Thought for the Day

Ludwig von Mises, in Human Action (1949), talked about the inevitable bust that follows the boom. The world has had the boom and now we are seeing the beginning of the bust:

"The boom produces impoverishment. But still more disastrous are its moral ravages. It makes people despondent and dispirited. The more optimistic they were under the illusory prosperity of the boom, the greater is their despair and their feeling of frustration. The individual is always ready to ascribe his good luck to his own efficiency and to take it as a well-deserved reward for his talent, application, and probity. But reverses of fortune he always charges to other people, and most of all to the absurdity of social and political institutions. He does not blame the authorities for having fostered the boom. He reviles them for the inevitable collapse. In the opinion of the public, more inflation and more credit expansion are the only remedy against the evils which inflation and credit expansion have brought about."

So Keynesian economics follows naturally as a means of appeasing the mob. Greece has riots in the streets and appeases the people with more borrowed money.

But as Maggie Thatcher pointed out 30 years ago, "Eventually we run out of other peoples' money".

We can see the bust unfolding around the world. The more profligate and weaker economies going first and others slowly following. Zimbabwe, Iceland and now Greece and the other Mediterranean EU countries collectively called the PIIGS - Portugal, Ireland, Italy, Greece and Spain. But the US the UK and France are also in the same trouble and they are major western powers.

REAL Economics applies to us all.


Feb 25, 2010, 19:28