Attempts to prevent liquidation once the crisis had come

I stumbled on an economist whose advice might prove useful in Washington these days, even though he’s not a pure laissez-faire capitalist, more’s the pity.

“Instead of furthering the inevitable liquidation of the maladjustments brought about by the boom during the last three years, all conceivable means have been used to prevent that readjustment from taking place; and one of these means, which has been repeatedly tried though without success, from the earliest to the most recent stages of depression, has been this deliberate policy of credit expansion,” this fellow explains.

“To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection of production, we want to create further misdirection -- a procedure that can only lead to a much more severe crisis as soon as the credit expansion comes to an end,” he continues.

“It is probably to this experiment, together with the attempts to prevent liquidation once the crisis had come, that we owe the exceptional severity and duration of the depression. We must not forget that, for the last six or eight years, monetary policy all over the world has followed the advice of the stabilizers. It is high time that their influence, which has already done harm enough, should be overthrown.”

The fellow’s name is Friedrich August von Hayek, author of the 1944 classic “The Road to Serfdom,” a title meant to refer to the kind of economic policies being promoted these days by Ben Bernanke, Hank Paulson, Chris Dodd, Barney Frank, George Bush, Barack Obama, Harry Reid, Nancy Pelosi, Joe Biden, Hillary Clinton, John Kerry, and John McCain.
 
He spoke these words during an earlier presidential campaign, in which Americans faced an equally unappetizing choice between a small field of misguided socialist/statist meddlers, in June of 1932.
 
F.A. Hayek shared the Nobel prize for economics in 1974. He died in 1992. Not that it matters. If he were still alive, he’d still be waiting for anyone in Washington -- with the possible exceptions of Ron Paul, Bob Barr, and Nevada’s own Dean Heller -- to listen to him.

See Ron Paul’s Friday warning on where the “bailout” will lead at: http://nalert.blogspot.com/2008/10/ron-paul-warns-of-bailout-will-lead-to.html.