Tuesday, August 4, 2015

The Danger of Ignoring the Past and the Wisdom of Economists

"Attempts to carry out economic reforms from the monetary side can never amount to anything but an artificial stimulation of economic activity by an expansion of the circulation, and this, as must constantly be emphasized, must necessarily lead to crisis and depression. Recurring economic crises are nothing but the consequence of attempts, despite all the teachings of experience and all the warnings of the economists, to stimulate economic activity by means of additional credit." 
(Source: Ludwig von Mises, The Theory of Money and Credit, 1953, p. 21)

As Ludwig von Mises concluded his 1934 Preface to the English edition of his book, he emphasized once again the danger of increasing credit expansion, which will eventually end into economic crisis. I wonder why after more than eight decades and with the accessibility of information in our time, the wisdom of the Austrian school of economics is still largely ignored by academic institutions and policy makers. I cannot avoid but to think that perhaps the political control of money is really addictive on the part of government officials and those who benefit from the system. Perhaps, it is really such a great temptation that is too difficult to resist. And so regardless of setting up parameters to avoid the abuse of this power, history teaches us that government's control over the monetary system has always been abused to the detriment of the people's welfare.