John Tamny, Political Economy Editor at Forbes, spoke to the Austrian Economics Research Conference about the roots of the Great Depression, the financial crisis, and the Great Recession. He explained how most modern economists ignore important economic fundamentals, or simply misunderstand them. For example, contrary to popular belief, governments cannot stimulate demand by simply spending more. He also focused on the beauty of recessions, which allow an economy to cleanse itself of bad business practices. Like Peter Schiff, Tamny argues that the US needs to experience a painful, but necessary recession sooner than later to truly heal its economy.
Highlights from Tamny’s speech:
“While most economists don’t understand this, government spending is very definitely a tax. You’ll hear this a lot today, but governments have no resources. They can only spend insofar as they extract the resources that we produce first in the real economy. Then there’s regulation. Let’s be very blunt here: regulations do not work. If anyone doubts this, all they need to do is look at the banking sector back in 2008. It was easily the most regulated sector in the United States, yet those charged with overseeing the banks did not have a clue about the problems within them…
“We are an economy of individuals, and as individuals we are free traders… [Floating money] creates all sorts of distortions and disfigurements in the economy, what von Mises referred to as ‘malinvestment’ when money is floating around in value…
“If you talk to most [economists], they say the answer to our present malaise is simple: governments must spend with abandon to get demand up in our economy. That is our fix. The problem with such a belief is manyfold. Number one, once again, governments have no resources, so they must extract resources from entrepreneurs and businesses eager to grow. Second thing is that the last thing a government would need or want to do is stimulate demand. The reason for that is simple. As individuals, we are wired to demand things…
