It’s a shame that economist Kurt Richebacher passed away before he saw his economic predictions come true. For years he warned about the collapse that would follow what he called the greatest credit expansion in history. He argued that credit growth had reached insane levels. He said this unprecedented debt level would eventually wreak havoc on the U.S. economy. He railed against the huge trade deficit and criticized the monstrous government deficit.
About fifteen years ago I read an interview with Kurt Richebacher. He said all the things I believed. He was the only economist or analyst anywhere leveling powerful criticism against the easy money policies of the Fed. He came down hard on Alan Greenspan. His views were rooted in Austrian economics.
I concluded that, if the great Austrian economist, Ludwig von Mises were still alive, his views would parallel those of Kurt Richebacher. Mises was the world’s foremost critic of socialism, big government, unsound money and inflation. In the great European inflation of the 1920s, he was asked how to end the rampant price inflation. "Stop the printing presses," he admonished.
If they were alive today, both would no doubt criticize the highly inflationary, dollar-damaging government bailouts. To them, recession has a cleansing effect, liquidating the excesses of the credit-induced boom. They advocated short-term pain rather than bolstering failed institutions with massive inflating that further debased the currency. They saw political outcomes and government intervention only leading to a greater crisis downstream. The French economist, Frederic Bastiat, taught in an earlier century that a short-term economic good had a bad long-term effect and a bad short-term economic policy had a long-term good effect. Never has this been more true than today.
Over the years I became close with Kurt Richebacher. He saw clearly into the future. He would scoff at the idea of propping up today’s economy with the same inflationary medicine that caused the problem. Most everyone will endorse the idea of a massive government bailout. They want to keep the good times rolling (me included). In such an inflationary environment, it’s my opinion there will never be a better opportunity for natural resources like silver. Socializing the financial system may work for now, but somewhere out there lies the ultimate financial crisis, the one that no government action can cure.
One final thought. The widespread call for more regulation overlooks the fact that plenty of regulation already exists. Unfortunately, most regulators are not competent enough to regulate. Those who work in an industry are the real experts. Regulators only have a superficial knowledge of what they are regulating. That’s why we have so much regulatory failure. More regulation won’t help. We need some other approach.