In Jim Cook's Archive


Ralph Waldo Emerson wrote that “Fear is an instructor of great sagacity…He indicates great wrongs that must be revised.” The great wrong in our modern era was to give the government monopoly control over our money. The government’s unlimited expansion of money and credit fosters the boom and bust business cycle. The reason to fear is that we are due for a gargantuan bust. The coming panic and crash will dishearten the nation and show our politicians and monetary authorities to be seriously mistaken. We will suffer grievously because of the great Keynesian error foisted upon us by Washington and Wall Street. Such a warning was written by the wise economists of the Austrian School.

Artificially low interest rates and boundless money and credit cause an unhealthy boom within which malinvestment and speculation flourish. Such a boom cannot last and must always lead to a slump and depression. In this current go-around, our monetary excesses created runaway financialization, leverage and an asset boom. Production languished and the economy struggled. Now we are at the end of our rope as the bond market threatens to collapse and stocks promise to follow.

The Austrian School teaches that in the bubble economy unless money and credit continually expand, a slowdown occurs. More money is required or the crisis deepens. Our central bank has been pumping furiously for years, but recently this has come to a halt and a contraction is under way. As liquidity dries up the dogmatic Keynesians will press for money creation on a grand scale. That policy threatens the primacy of the dollar. We’re into the nasty part of the cycle now and an ocean away the world’s second largest economy threatens to implode. According to the Austrian School, an economic collapse in China is inevitable.

Never have so many voices been raised warning of imminent danger. What can it mean to you? Stock values will shrivel, bonds will collapse, real estate and tangible assets will take a crushing hit, savings will be eroded and fear will prevail. This is the beginning of the catastrophe that the Austrian School’s preeminent thinker Ludwig von Mises warned about. “The monetary and credit policies of all nations are headed for a new catastrophe probably more disastrous than any of the prior slumps.”  You either take your medicine and let a depression kill off the excesses and mistakes in your economy or you ultimately hyperinflate and kill your currency.

Dark days lie ahead. Our debts, wasteful spending, high taxes, overregulation and our welfare culture have deprived our economy of resilience. A bloated government smothers our vitality. The retribution has begun and with it comes a great reshuffling of wealth. There is no middle road out of this mess – “A great wrong must be revised,” Sound money must resurface.

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