Economic Depressions
"If the federal government's economists have been good for nothing else," wrote Murray N. Rothbard, "they have made great strides in what might be called 'creative economic semantics.'" A so-called budget "cut" is not a cut these days. Even if the budget truly expands, we might still call it a "cut" because the rate of expansion decreased. (Oh, boy! How great.)
Euphemisms, fittingly, are also to be found in the language of economics. For sure, politicians could never allow anyone to utter the depressing word "depression." (Or, worse, "crash" or "panic.") Therefore the word was replaced with "recession." Other substitutes include "downturn," "slowdown," and "sidewise movement."
On the subject of depression the weekend edition of LRC featured a 1969 essay by Rothbard called “Economic Depressions: Their Cause and Cure.” According to LRC, the Constitutional Alliance of Lansing, Michigan originally published it as a minibook.
In the paper Rothbard explains that the modern establishment view of the business cycle matches Karl Marx's. That the business cycle is an integral part of capitalism, and that the State is required to smooth out its supposed instability. Similar to an automobile, capitalism is either traveling too fast or too slow, in terms of the spending behavior of consumers.
The problems with this are many. A two-faced view of the market economy exists with two incompatible theories. But they can't be both correct. There is a theory that explains the steady movement of market prices. Then there is the separate theory that tries to explain the occurrences of booms and busts, without squaring it with the first theory.
Today's Keynesian view, says Rothbard, does not account for the entrepreneur. No explanation exists why all of a sudden multiple errors suddenly occur on the market. In addition, there is a gap in explaining the fact that capital goods industries are hit the most; not consumers' goods. Keynesians say that the second area should be most hit.
The answer lies in inflation and the artificial lowering of the interest rate.
See Also: "Herbert Hoover's Depression" by Murray N. Rothbard and "The Greatness of the Market in a Crisis" by Llewellyn H. Rockwell, Jr.
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