Hey, Here's Something of Relevance...

Mises... pinpoints the blame for the cycle on inflationary bank credit expansion propelled by the intervention of government and its central bank.  What does Mises say should be done, say by government, once the depression arrives?  What is the governmental role in the cure of depression? In the first place, government must cease inflating as soon as possible.  It is true that this will, inevitably, bring the inflationary boom abruptly to an end, and commence the inevitable recession or depression.  But the longer the government waits for this, the worse the necessary readjustments will have to be.  The sooner the depression-readjustment is gotten over with, the better.  This means, also, that the government must never try to prop up unsound business situations; it must never bail out or lend money to business firms in trouble.Doing this will simply prolong the agony and convert a sharp and quick depression phase into a lingering and chronic disease.  The government must never try to prop up wage rates or prices of producers' good; doing so will prolong and delay indefinitely the completion of the depression-adjustment process; it will cause indefinite and prolonged depression and mass unemployment in the vital capital goods industries.  The government must not try to inflate again, in order to get out of the depression.  For even if this reinflation succeeds, it will only sow greater trouble later on.  The government must do nothing to encourage consumption, and it must not increase its own expenditures, for this will further increase the social consumption/investment ratio.  In fact, cutting the government budget will improve the ratio.  What the economy needs is not more consumption spending but more saving, in order to validate some of the excessive investments of the boom.

                                                                                Rothbard (1969)

I recommend the little text from which you can read the entire piece:  The Austrian Theory of the Trade Cycle, ed. Richard Ebeling (Mises Institute, 1996).

Comments

[Acton.]

Glad to know our government's doing the right thing. :)