It appears that the latest (of many, historically recent) shock in the international finance market comes as a huge surprise to most people. Some are even talking about a "market failure" and/or a "flaws in capitalism".
I understand statements like these. I understand them because I know where they come from and what their basis is. They come from populist preachers of faulty economics.
So how should one understand the latest (of many) crisis in the world's financial markets? The answer is here. Written in 1980 (as fourth edition of the publication, so the text is considerable older), was the following:
Until and unless we return to the classical gold standard at a realistic gold price, the international money system is fated to shift back and forth between fixed and fluctuating exchange rate,s with each system posing unsolved problems, working badly, and finally disintegrating. And fueling this disintegration will be the continued inflation of the supply of dollars and hence of American prices which show no sign of abating. The prospect for the future is accelerating and eventually runaway inflation at home, accompanied by monetary breakdown and economic warfare abroad. This prognosis can only be changed by a drastic alteration of the American and world monetary system: by the return to a free market commodity money such as gold, and by removing government totally from the monetary scene.
I dare anyone to say that this prognosis hasn't come true. History and sound economics will quickly kick such a denial to the ground. Do you dare?
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First printing of this book was January, 1964.
Second Edition was in January, 1974.
A great new introduction can be found at: http://mises.org/money/lewintro.asp
The book can be downloaded in .pdf format at: http://mises.org/books/whathasgovernmentdone.pdf
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