The book Meltdown by Thomas E. Woods Jr. contains an explanation of the problems in the American economy in the recent past and the government’s attempts to fix them. It shows how bailouts, stimulus packages, and control of the interest rate and money supply through the Federal Reserve only increases the severity and length of the economy’s problems. For example, it gives a clear explanation of how the government, through the Community Reinvestment Act, forced banks to make mortgage loans to potential home buyers who were bad risks and did not have the income or qualifications to repay the mortgage. This, along with the government sponsored corporations FNMA and FHLMC that the banks knew would buy up the bad loans, and the Federal Reserve’s artificially cheap credit, were major causes of the housing bubble that burst in 2008.
Woods goes on to give an easy-to-understand explanation of the Austrian theory of economics. He details how the Federal Reserve interferes with the operation of the free market by artificially lowering interest rates and causing resources to be invested in capital projects that cannot be completed or sustained by the economy because the demand for them is not there. Thus, these resources and labor invested are wasted when they could have been put into products or lines that would have been supported by consumers. He also gives a detailed explanation of the myths and actual causes of the Great Depression and what can be learned from the errors made in dealing with it.
In conclusion, Woods offers his suggestions for repairing our faulty monetary system which is based on fiat money with no commodity backup and depends on government intervention through the central bank to keep it afloat. He provides clearly understood examples of how credit has to be based on real savings and money cannot be created out of thin air by the government, injected into the economy and result in any true benefit. Woods also details a number of free-market reforms that should be made to start the economy on the road to health. Included are letting dysfunctional businesses go bankrupt, abolishing Fannie Mae and Freddie Mac, stopping government bailouts and cutting government spending, and ending government manipulation of money. He also agrees with Ron Paul that the Federal Reserve should be abolished because it is responsible for more economic instability than any other institution.
There is a wealth of important information in the book Meltdown and it is written so that a person without a degree in economics can understand the principles. It is common practical sense but many in government are not willing to see it and act accordingly so that the American economy can improve in a stable way and not just be propped up from crisis to crisis.
Tom Woods has a daily podcast show that covers a wide range of libertarian and sound money related topics.
Get the book through Amazon.com here.