Courtesy of Pater Tenebrarum of Acting-Man
Should Recessions be Feared and Avoided?
Back in 1969, a monograph by Murray Rothbard was published as a small booklet. Its title was “Economic Depressions: Their Cause and Cure” (readers unfamiliar with the essay can download the pdf version below). The booklet achieved enormous circulation at the time and remains a timeless, trenchant and rigorous analysis of the essence of the business cycle accessible to everyone.
A photograph showing a man leaning against a wall next to an empty shopfront during the Great Depression of the 1930s.
A towering intellect, as gifted as an economist as he was as a historian and political and ethical philosopher, Murray Rothbard never lost sight of Ludwig von Mises’ famous admonition:
“Economics must not be relegated to classrooms an statistical offices and must not be left to esoteric circles. It is the philosophy of human life and action and concerns everybody and everything. It is the pith of civilization and of man’s human existence.”
We may leave physics and chemistry to experts, but economics is a different matter. Every citizen should at least acquire passing knowledge of economic theory, so as to avoid being bamboozled by ideologues, politicians and their empty promises.
Unfortunately, today most of the economics profession itself has been bought off by the technocratic ruling elite and its central planning agencies. But the powers-that-be have underestimated the internet. Today it is possible for people to access information that has been repressed by the mainstream for decades. The intellectual heirs of Mises and Rothbard can once again make themselves heard.
The new Incrementum chart book (which can be downloaded below) looks at the growing probability of a US recession and asks: how can we recognize whether a recession is likely well ahead of the belated official acknowledgments? Should we actually fear a recession? What, if anything should be done about it? And how can investors safely navigate it?
Investors cannot afford to wait for the government to declare that there is a recession; by the time it does, the recession is usually over, or almost over.
As to the question “what should be done about it?” we will let Murray Rothbard speak:
“[Thus], what the government should do, according to the Misesian analysis of the depression, is absolutely nothing. It should, from the point of view of economic health and ending the depression as quickly as possible, maintain a strict hands off, “ laissez-faire” policy.
Anything it does will delay and obstruct the adjustment process of the market; the less it does, the more rapidly will the market adjustment process do its work, and sound economic recovery ensue.
The Misesian prescription is thus the exact opposite of the Keynesian: It is for the government to keep absolute hands off the economy and to confine itself to stopping its own inflation and to cutting its own budget.”
(emphasis added)
Indeed, there is no reason to fear recessions or to intervene in them. They represent a healing process. Only by liquidating the malinvestments of the boom and rearranging the economy’s structure of production as quickly as possible to the actual wishes of consumers can a sound recovery be achieved.
Even if one knows nothing about economic theory and the debate between those advocating the free market approach and those in favor of central planning by the bureaucracy, one should by now have realized that the approach pursued by our vaunted policymakers has failed. In Japan this has been demonstrated for 26 years running: no amount of Keynesian deficit spending and monetarist money printing has brought about the desired results.
We believe the snake oil sellers should finally be forced to look for real jobs. We’d be very interested in seeing them serving consumers in the free market rather than forcing their failing prescription on entire populations. It is high time to try a different approach.
Here is a pertinent quote from the conclusion to Rothbard’s essay:
“The time is ripe—for a rediscovery, a renaissance, of the Mises theory of the business cycle. It can come none too soon; if it ever does, the whole concept of a Council of Economic Advisors would be swept away, and we would see a massive retreat of government from the economic sphere.
But for all this to happen, the world of economics, and the public at large, must be made aware of the existence of an explanation of the business cycle that has lain neglected on the shelf for all too many tragic years.”
Amen.
Murray Rothbard, the irrepressible champion of liberty
Complete Incrementum Chartbook below: Who is Afraid of Recession
