Let them go bankrupt!
“Without a lay-friendly book like [Dr. Mark Thornton’s] The Skyscraper Curse, millions more Americans will be duped by the next crash. They won’t understand the historically unprecedented and bizarre Fed program of quantitative easing, they won’t understand the impact of manipulated interest rates, and they sure won’t understand the gross malinvestment that levered up trillions of dollars in new business debt. Instead, we’ll hear about ‘unbridled capitalism’ and ‘unregulated markets’ as culprits. We’ll be told that extraordinary new measures are needed. More industries, and maybe even the banks again, will be bailed out.
Worst of all, the press will focus on what the Fed and Congress should do, rather than what they shouldn’t. The only real cure for too much debt is an orderly process of liquidation: let insolvent banks and debt-ridden firms go bankrupt, let their shareholders take a haircut, and let new entrepreneurs and firms buy the assets out of bankruptcy. No bailouts. No subsidies. No taxpayer involvement.” – Jeff Deist, Mises Institute (March 2018)
Dr. MoneyWise says: Anna Schwartz, who co-authored A Monetary History of the United States with Milton Friedman, very publicly recommended exactly the same remedy in 2008. Such comeuppance never occurred. The banks and other industries were bailed out, and we ended up where we are today – in a deeper hole than ever with the threat of an even more dangerous crisis than the last hanging over us.
Jeff Deist is the president of the Mises Institute.