Meltdown: A Free Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse

by Thomas E. Woods, Jr.

Since the fall of 2008 -- as the stock market plummeted, companies folded, and millions were put out of work -- Americans have been bombarded with a relentless refrain: the free market economy has failed. The remedy? According to Barack Obama, the late Bush Administration, Democrats and Republicans in Congress, and the mainstream media, it's more regulation, more government intervention, and more spending. But now, in Meltdown: A Free Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse, bestselling author Thomas E. Woods Jr. demonstrates that the current crisis was caused not by the free market but by the government's intervention in the market -- and that further intervention in the form of trillion-dollar bailouts and "stimulus packages" will only deepen and prolong the pain.

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But Meltdown goes deeper, tracing this most recent boom-and-bust cycle -- and all such booms and busts of the past century -- to one of the most revered government institutions of all: the Federal Reserve System, which allows busy-body bureaucrats to pull the strings on our financial sectors and the value of the very money we use. Indeed, Woods shows, the Federal Reserve's policy of intervening in the economy to push interest rates lower than the market would have set them was the single greatest contributor to the crisis that continues to unfold before us.

Meltdown also provides a timely history lesson to counter the current call for a new New Deal. The Great Depression, Woods points out, was only as deep and as long as it was because of the government interventions by Herbert Hoover (no free-market capitalist, despite what your high school history teacher may have taught you) and Franklin D. Roosevelt (no savior of the American economy, despite what the mainstream media today tells you).

• How government created the housing bubble: 7 key culprits

• How the secondary mortgage market that converted high- risk loans into "toxic assets" was fueled by the special privileges Fannie and Freddie have been granted by government

• Government-created monsters: How Fannie and Freddie grew from minor players in the mortgage market to having a hand in nearly three-quarters of new mortgages by 2008

• Follow the money: How Fannie became a Democratic Party piggy bank, with former Clinton budget director Franklin Raines walking away with the grand prize: $100 million

• The Community Reinvestment Act and the push for affirmative action in lending

• The error-riddled 1992 "study" by the Federal Reserve Bank of Boston that claimed to find that mortgage lenders were discriminatiing against blacks and Hispanics

• How left-wing groups like ACORN blocked drive-up lanes and made business impossible for banks until they surrendered to demands that they make billions in loans they wouldn't otherwise have made

• How the push for relaxed lending standards for low and middle-income borrowers spilled over into the standards for higher-income borrowers as well

• How loosened lending requirements, capital-gains exemptions and adjustable-rate mortgages all fueled a frenzy of speculation in real estate

• How government at all levels developed hundreds of little programs intended to encourage more people to buy homes, channeling more artificial demand into the housing sector

• Why it was the Fed, ultimately, that made the artificial boom in housing possible in the first place -- and it was all the new money it created that gave the biggest stimulus to the unnatural rise in housing prices

• The root of boom-bust cycles in central banks -- in our case that's the Federal Reserve System, the very institution that postures as the protector of the economy and the source of relief from business cycles

• Why recession is the necessary if unfortunate process by which the malinvestments of boom periods are corrected

• Why the longer we try to prop things up artificially, the worse the inevitable bust will be

• How an easy-money policy lures increasingly reckless or ill-prepared investors into the game, and misleads people into thinking a particular investment strategy is a no- lose proposition

• The "Too Big to Fail" mentality: how certain actors in financial markets have been able to operate in the confidence that they, and the system as a whole, will not be allowed to fail, and that in one way or another the American taxpayer will absorb the losses

• How policies that might keep recessions short and swift are inevitably passed over in favor of proposals that will make Americans poorer and keep the hard times going

• Why firms we're told are too big to fail are in fact too big to be kept alive -- and doing so via government bailouts discourages rather than encourages capital formation and economic recovery

• Why government intervention in banking only means that wild risks will still be taken -- except with the beneficiaries being selected more deliberately from among politicians' friends and various favored constituencies

• The folly of public-works stimulus: 3 reasons additional spending on "infrastructure" and the like is one of the last things the economy needs

• Japan's "lost decade" revisited: how none of the traditional interventionist tools that supposedly bring about economic recovery -- every one of which is being peddled before Americans today -- did a single thing to revive Japan's fortunes during her fifteen-year slump

• Great myths about the Great Depression -- and other meltdowns throughout history

• How Herbert Hoover's unprecedented interventions took the 1929 downturn and made it into the Great Depression -- and FDR's New Deal only prolonged it

• Ludwig von Mises in the 1930s: "To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about"

• The "forgotten depression" of 1920–1921: why it was so short compared to its 1930s successor -- and why that is especially instructive for us today

• How monetary systems based on precious metals such as gold and silver impose restraints on government spending -- which is why ambitious politicians hate them

• "The Fed should inject credit!" Why this is one of the great economic superstitions of our time

• Why the Austrian theory of the business cycle is the single most important piece of economic knowledge for Americans right now

• What now? 7 important free-market reforms to restore the economy to health in the short run, and to build a foundation for genuine prosperity in the long run

"We can probably expect an avalanche of books in the coming months that purport to tell us what happened to the economy and what we should do about it. They'll be dead wrong, and most of the advice they provide will be dreadful. You can count on that. That's why Meltdown is so important. This book actually gets things right. It correctly identifies our problems, their causes, and what we should do about them. It treats the architects of this debacle not with the undeserved reverence they receive in Washington and on television, but with the critical eye that is so conspicuously missing from our supposedly independent thinkers in academia and the media. Tom Woods reserves his admiration for those few who, unlike the quacks who would instruct us now, actually saw the crisis coming, have a theory to explain it, and can show us the way out. . .Ideas still matter, and sound economic education has rarely been as urgently necessary as it is today. There is no better book to read on the present crisis than this one." – CONGRESSMAN RON PAUL (R-TX)

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 MICHAEL A MOORE II
A very detailed look into the complexities that are overlooked by our politicians. Ignoring these factors will only prolong and we will be bound to repeat ourselves again if Washington does not listen to all factors.

A must read for anyone concerned about the future of our nations monetary system and economy in general. I found it a very easy read and very, very informative.

P. Carey, NH