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Tag Archives: Ludwig von Mises

The media pundits are shocked! The politicians are slack-jawed. What can we do? Our financial system is in tatters! We’re in a housing crisis, a recession, or a depression, depending on which term you prefer. Credit has dried up for all but the squeaky cleanest of borrowers! How could this be possible? After all, here in the good ol’ U.S. of A. we have this wonderful institution called the Federal Reserve that’s supposed to keep the financial system safe from all of those power mad, greedy capitalists who supposedly ruin the good times for everyone. Well, the whole mess can be summed up with two words: credit expansion.

From we see this statement concerning the central banks actions in the aftermath of the September 11 attacks : “The Fed moved aggressively to supply credit and lower interest rates in an effort to resurrect the markets and keep the economy out of recession.”

And from NPR: “Federal Reserve officials kept interest rates artificially low after the Sept. 11, 2001, terrorist attacks and that helped create the housing bubble.”

Even CNBC’s ranting establishment money man, Jim Cramer had harsh words for the Fed when he railed that, “The Federal Reserve created the stock bubble with low margin rates and it created the housing bubble with low mortgage rates, yet I never hear about anyone talking about investigating the Fed,”

And from Robert P. Murphy and Lee Hoskins on “A good portion of the housing mess itself is the result of Fed policy: In response to the 2000-2001 recession, chairman Alan Greenspan brought the federal funds rate down to a shocking 1% by June 2003, then held it there for a full year.”

Those are just a few comments. However, they illustrate the dangers that are involved when the Fed slashes interest rates below the normal market level in an effort to expand credit and lead people to believe that prosperity can be created out of thin air. The Austrian economists, however, recognized the dangers of reckless credit expansion many years ago. Here a few comments from Ludwig von Mises on this subject. They are all taken from his book Human Action , which was published in 1949.

“The essence of a credit-expansion boom is not overinvestment, but investment in wrong lines, i.e., malinvestment.”

“What is needed for a sound expansion of production is additional capital goods, not money or fiduciary media. The credit boom is built on the sands of banknotes and deposits. It must collapse.”

“If the credit expansion is not stopped in time, the boom turns into the crack-up boom; the flight into real values begins, and the whole monetary system founders.”

“The final outcome of the credit expansion is general impoverishment.”

“Credit expansion is the governments’ foremost tool in their struggle against the market economy. In their hands it is the magic wand designed to conjure away the scarcity of capital goods, to lower the rate of interest or to abolish it altogether, to finance lavish government spending, to expropriate the capitalists, to contrive everlasting booms, and to make everybody prosperous.”

These quotations, and many others on various topics and issues are compiled in The Quotable Mises, edited by Mark Thornton.


I get the impression that some people, mainly those who are not supporters of Ron Paul, believe that there exists a kind of “Ron Paul cult.” I disagree wholeheartedly with this belief. Dr. Paul has never presented himself in a messianic way. In fact, he has gone to great lengths to remind people that his “revolution” is not really about him. After all, he never coined the term “Ron Paul Revolution.” His supporters did. Yes, he is acting as a conduit for libertarianism. And that is precisely why libertarians, no matter what their formal party affiliation may be, are thrilled that he is taking the message of property rights, free markets, and peace to new heights.

Occasionally, however, it seems that many anti-paul people just respond to his statements with a quizzical look and wonder where in the world he came up with his various positions on economics and foreign policy. I mean, he must have just made this stuff up, right? Well, as it turns out, he did not just wake up one day and invent libertarianism. His message does not require people to idolize him. It does not glorify Ron Paul at all. It glorifies the concept of laissez-faire that was embodied in the classical liberals of the 18th and 19th centuries.

Looking at some of these classical liberals’ quotes, as well as some quotes from classical liberals of the 20th century, we can see where Ron Paul gets his inspiration. First there’s Frederic Bastiat (1801-1850), a French classical liberal theorist and political econmist who commented:

“Sometimes the law defends plunder and participates in it. Sometimes the law places the whole apparatus of judges, police, prisons and gendarmes at the service of the plunderers, and treats the victim – when he defends himself – as a criminal.”

And then there is Carl Menger (1840-1921), the founder of the Austrian School of Economics who said regarding money,

“Money is not an invention of the state. It is not the product of a legislative act. The sanction of political authority is not necessary for its existence.”

And of course, there’s a man whose portrait hangs on Ron Paul’s office wall. He is economist and philosopher, Ludwig von Mises (1881-1973) who had this to say about war:

“To defeat the aggressors is not enough to make peace durable. The main thing is to discard the ideology that generates war.”

How many times have we heard Ron Paul talk about the dangers of our foreign policy of intervention? For it is the ideology that generates war. Here’s more on that subject from another man who influenced Ron Paul. He was economist and author Murray Rothbard (1926-1995), who also had strong beliefs regarding State expansion during times of war:

“It is in war that the State really comes into its own: swelling in power, in number, in pride, in absolute dominion over the economy and the society.”

Moving into sectors of the economy we find Henry Hazlitt (1894-1993), a libertarian philosopher,economist, and journalist who said:

“The ‘private sector’ of the economy is, in fact, the voluntary sector; and the ‘public sector’ is, in fact, the coercive sector.”

Again, we can hear echoes of these words in Ron Paul’s writings and statements today.

Finally, there’s the issue of civil liberties. Friedrich Hayek (1899-1992) an economist and political philosopher stated:

“‘Emergencies’ have always been the pretext on which the safeguards of individual liberty have been eroded.”

Sounds just a bit like something Ron Paul would say, doesn’t it?

All of these men I have cited were champions of liberty. The message Ron Paul brings to us now is the same message they espoused. There is no “cult of Ron Paul.” The movement of which he is an important part requires no worship of the messenger. Furthermore, the whole notion of an omnipotent central leader is anathema to libertarians, who revel in freedom for individuals. This is not to say that libertarians are atomistic beings who want no social interaction with other people. It is to say that all associations should be voluntary and free from government coercion.

The messengers will change. The message will remain the same.

So, Roger Clemens, possibly the best baseball pitcher of all time, may have used steroids. The New England Patriots were caught cheating in what is being referred to as “spygate.” And while I personally do not condone athletes’ use of performance enhancing drugs OR cheating, I also do not condone our government’s interference in matters which are none of its business. Major League Baseball is more than capable of handling its steroid problem on its own. Just as the National Football League is more than capable of dealing with the snooping tactics of the Patriots. And speaking of snooping, it seems that many members of our government have no problem with it as long as THEY are the ones doing the snooping…on us, of course.

But I digress.

One would think that a sports “scandal” would be dealt with by the respective sports’ governing bodies. Ah, but not when the U.S. of A has anything to say about it. For our government believes these “scandals” can best be dealt with on Capitol Hill. Actually, this should hardly be a surprise. We already know that the U.S. government considers itself the final arbiter in EVERY conflict, scandal, and political struggle that may be going on in ANY part of the world. So why should MLB and the NFL be exempt from government intervention? It almost seems like an addiction. The government just CANNOT stop sticking its repugnant honker into EVERYONE’S business! What, exactly does a baseball player using steroids, or a football team cheating have to do with the government?

To make matters worse, Roger Clemens’ hearing was a joke. AND, if Clemens is found guilty of lying to Congress, he could be sentenced to five years in jail. Yes, for a matter that has absolutely NOTHING to do with our government, this man could lose his freedom for five years. And where does it stop? In the future, if I break the rules set by my employer, will I receive a summons to appear before a Congressional committee and explain my actions? Will I face the prospect of spending time in a Federal penitentiary if I’m found guilty of lying under oath? You may think I’m overreacting, but just think about it. Notice how many casual observers just can’t get enough of these government show trials. Many people just LOVE to see alleged perpetrators receive their comeuppance at the hands of the authorities. Of course, they only like it when the government is interfering in OTHER people’s affairs. They never imagine it could happen to them.

As for “spygate,” NFL commissioner Roger Goodell met with Senator Arlen Specter, who wants, you got it, Congressional hearings if he’s not completely satisfied with Goodell’s assessment of the situation.

But let’s look at the issue of lying. If a member of the private sector lies to a member of the government, he or she will most likely be imprisoned. If a member of government, let’s say president, lies to all of the private sector in order to launch a war that has resulted in an enormous loss of life and priceless property destruction, that man walks free. He doesn’t even face impeachment.

Quite a lesson we’ve learned here. Governments destroy lives and wealth with impunity. It seems so obvious. And yet some people still can’t understand why drastically LESS government is the ONLY solution to ALL of our problems. As the great Austrian economist Ludwig von Mises said about government, ” It is in the nature of the men handling the apparatus of compulsion and coercion to overrate its power to work, and to strive at subduing all spheres of human life to its immediate influence.”