The whole structure of the national American political system has rested on the solvency of the largest American banks. These banks have all been called into question. They are now gutted. Do I see this as the end of freedom? No, I see it is the end of the fascist state. The monstrosity came close to going belly-up last October. It is on its last, tottering legs. It has lost the respect of the public...
The second event that I regard as almost comparable in importance to the collapse of the Soviet Union was the collapse of the American banking system that took place in September and October of 2008...
Anyone who does not understand the magnitude of what is taking place is an economic ignoramus...
Here is their intellectual problem: they do not believe in the free market. They cannot conceive of a social institution based on voluntarism that can break the backs of government planners and central bankers. They will believe anything but this. They think of themselves as defenders of the free market, but they do not grasp the power of the free market to enforce consumers' decisions...It has been the Austrian School economists who have warned, decade after decade, that the increase in the federal debt would eventually threaten the solvency of the government and the stability of the dollar. Now that this is visibly coming true, we still do not hear from professional economists cries of warning regarding trillion-dollar annual federal deficits. They say nothing — except when they say it is a good idea, because it is necessary, because we have got to save the banks, because we have got to regulate the economy, and, most of all, because the unhampered free-market system really does not work.
This is what we are getting from people who have generally been known as free-market economists. They are lining up as cheerleaders as the banks go to the federal trough. The federal deficit soars into astronomical regions, and the monetary base soars just as fast, yet the academic economists are silent. This is not the silence of the lambs; this is a silence of unindicted co-conspirators...These people are apologists for the state...
The fascist state has always been an attempt to control private industry by means of inflation, taxation, and regulation. Fascism has always been a system of keeping the big boys alive and happy at the expense of the taxpayers. Of course, the faces change. The system was always one gigantic system of cartels, regulation, and fiat money...
The modern economic system is one gigantic interlocking system of promised bailouts, beginning with Social Security...
Always in the past, there has been a recovery after a recession. Always in the past, the bailouts have worked to cover up the underlying malinvested capital. Always in the past, the Federal Reserve has inflated, and the economy revived.
This economy will revive, but it will revive on a new basis. It is no longer possible for someone who understands Austrian School economics to look at this economy as anything remotely resembling a free-market economy.
My thoughts: One of North's best essays. Unfortunately it could be a generation or two before we truly recover.
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