The article is wrong. Euphoric investment bubbles can't exist unless there's enough cheap money to fuel it. Over-investment and mal-investment is not the Cause. But rather the Effect. The real Cause is the Federal Reserve. The Federal Reserve 1) creates the massive liquidity needed to generate these bubbles, which spurs bad investment 2) provides the back-stop, or Moral Hazard, or Lender of Last Resort Facility that ensures lenders/bankers/underwriters/funds do not pay for their poor decisions. Knowing they won't be held accountable, they pile on even more and exacerbate the bubble even higher.
Btw, the US hasn't been a Free-Market since 1913 - the year the FED was enacted. Since then, its been controlled for the Bankers.
My pleasure. The US chartered several Central Banks prior to the Federal Reserve. These Banks were responsible for issuing part of the Nations Money Supply using Fractional Reserve lending. Other Private Banks, prior to the FED, were given authority, periodically, to engage in fractional reserve lending, as well. The result was a patchwork of private and National Banks that controlled the nations money supply, creating far too much or too little credit, resulting in the booms and busts experienced prior to 1913. Research money supply changes prior to the FED. You'll see the same thing - up 65% in 3 years, down 60% in 6 years. It was the same Game, just the players were more diffuse. Watch the money masters for a little bit of history. <embed id="VideoPlayback" src="http://video.google.com/googleplayer.swf?docid=-515319560256183936&hl=en&fs=true" style="width:400px;height:326px" allowFullScreen="true" allowScriptAccess="always" type="application/x-shockwave-flash"> </embed>
Like I said, without easy, cheap and voluminous credit, Human Nature cannot take price to such extremes. Its impossible. Ever study the Great Depression? Mom and Pops leveraged 100 to 1 in the Market? Then, on one single day, every brokerage (and some banks) call in their margin loans at 100%?
Tulpenwoede and the South Sea Bubble and French bank notes under John Law's fiat monetary policy are the first ones that come to mind..
So if I get your argument right it is no longer just the Fed you are railing against but the very concept of credit and money itself? You want a barter system? That is the logical end result of your argument. True or false. In your view was having the Fed an improvement over the system that existed immediately prior to its creation?