It will not be a very pleasant experience, although this is Goa, supposedly a tourist paradise – and tourists love to go shopping.
Chaudi, a tiny market town straddling a “notional highway,” is a tiny little disaster.
Just as the metro cities are big huge disasters.
How do we fix this massive country, when there are urban disasters all over?
I daresay no single man can do it.
Anyway, the thought of market day has reduced my desire to write.
But I will leave you with something worthwhile to read:
First: “Beware of Obamanomics” by Tom Woods, a white paper published by Euro Pacific Capital, the investment firm run by Peter Schiff. The report concludes:
“… the president’s program aggravates every existing problem in the American economy, and will make genuine recovery all the longer in coming. Whether we measure these policies against history or sound economic theory, the verdict is the same: the president has chosen a path that is guaranteed to fail.”
The report looks not only at Obama’s “stimulus,” but also at his “green jobs” programme.
Well worth a read.
Tom Woods is the author of Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse.
This book has been a huge success. I am yet to get hold of a copy, but I read somewhere that it offers a very good explanation of the theory of the business cycle as propounded by economists of the “Austrian” school: Carl Menger, Ludwig von Mises, Friedrich Hayek, Murray Rothbard, Israel Kirzner, Hans-Hermann Hoppe.
Anyway, I also found this short article by Tom Woods, where he explains the Austrian theory of the business cycle in a nutshell. It goes:
Government-established central banks can artificially lower interest rates by increasing the supply of money (and thus the funds banks have available to lend) through the banking system. This is supposed to stimulate the economy. What it actually does is mislead investors into embarking on an investment boom that the artificially low rates seem to validate but that in fact cannot be sustained under existing economic conditions. Investments that would have correctly been assessed as unprofitable are falsely appraised as profitable, and over time the result is the squandering of countless resources in lines of investment that should never have been begun.
If lower interest rates are the result of increased saving by the public, this increase in saved resources provides the material wherewithal to see the additional investment through to completion. The situation is very different when the lower interest rates result from the Fed’s creation of new money out of thin air. In that case, the lower rates do not reflect an increase in the pool of savings from which investors can draw. Fed tinkering, in other words, does not increase the real stuff in the economy. The additional investment that the lower rates encourage therefore leads the economy down a path that is not sustainable in the long run. Investment decisions are made that quantitatively and qualitatively diverge from what the economy can support. The bust must come, no matter how much new money the central bank creates in a vain attempt to stave off the inevitable day of reckoning.
The recession or depression is the necessary, if unfortunate, correction process by which the malinvestments of the boom period, having at last been brought to light, are finally liquidated. The diversion of resources into unsustainable investments out of conformity with consumer desires and resource availability comes to an end, with businesses failing and investment projects abandoned. Although painful for many people, the recession/depression phase of the cycle is not where the damage is done. The bust is the period in which the economy sloughs off the malinvestments and the capital misallocation, re-establishes the structure of production along sustainable lines, and restores itself to health. The damage is done during the boom phase, the period of false prosperity that precedes the bust. It is then that the artificial lowering of interest rates causes the squandering of capital and the initiation of unsustainable investments. It is then that resources that would genuinely have satisfied consumer demand are diverted into projects that make sense only in light of the temporary and artificial conditions of the boom.
The lesson: If you want to end the boom-bust cycle, shut all central banks down.
Sound money.
Only the Austrians thought of that.
The deeper lesson: If prosperity could be created by cheap money and credit, poverty would vanish overnight.
Hope you learnt something new today.
I read Tom Woods' Meltdown recently. It's very well researched and interestingly written, especially for a lay reader. I like the extent Woods has gone to repeatedly stress with examples that what we have is not remotely "free market" and that what we are seeing is Govt failure and not market failure. Well worth whatever it costs. Not sure if it's available in India yet.
ReplyDeleteMeltdown is already popular among the Austrian crowd (myself being one of them). I am sure it will also appeal to lay readers who go more by common sense and intuition. But I doubt it'll find acceptance among mainstream economists who come with a great deal of pro-State ideological baggage. The (unstated) problem they have with Austrian economics is not that it's wrong, but that it sees very little or no role for the State in the economy.
I am waiting for Bob Murphy's "The Politically Incorrect Guide to the Great Depression and the New Deal". Should be a good read too.
Cheers!