Credit Crunch update: why not go with the form?

Meanwhile (16th December) David Aaronovitch’s aplomb knows no bounds. He wheels out J K Galbraith and Franklin D Roosevelt in support of his contention that history has lessons (really?) and it supports economic intervention (at times like this). Galbraith was the anti-freedom guru who (almost alone) believed the absurd and bogus output statistics of Soviet Russia right through to the mid-eighties, a quarter of a century after they were originally exposed. As for FDR’s recession-busting skills, Aaronovitch tells us that “many credit his New Deal with ending the recession", noting that 3 years after the 1929 crash and before Roosevelt’s accession “almost a quarter of working-age Americans were unemployed". What he didn’t tell us is that this statistic (and many others) barely budged throughout that decade. Indeed pre-Depression prosperity was not reached until after World War II. The evidence that the New Deal prolonged the recession is clear.

Chutzpah indeed! So why not go with the form – which means Ludwig von Mises (who throughout the second half of the 1920s predicted the Great Depression) and the Austrian School. As Mark Thornton writes about the last crash (1999-2002): “Given that the Austrian School is both small in number and marginalised in the profession, their dominance in making predictions seems like an elephant in the soup bowl". The same goes this time round with several Austrians pointing out the unsustainability as early as 2004 (with one such prophet called Alan Greenspan “Mr. Bailout"). Or compare an article written about the same time as Kaletsky’s a year ago “Economic Outlook 2008: Darkening Clouds".

Why should anybody believe anything that these guys write? Certainly Kaletsky (and no doubt Aaronovitch when strolling into economics) is a dyed in the wool Keynesian. The experience of the UK in the 1970s and Japan in the 1990s should have been enough to dismiss Keynes as an illiterate and incoherent charlatan (see also here) in the field of Economics (in fact he was not an economist at all).

I make no apologies for the fact that most of my web links herein are to the Ludwig von Mises Institute. As I have said, study the form. And, perhaps more important still, study the theories.

Terry Arthur is the author of Crap: A Guide to Politics. Buy it here from


“If it were possible to substitute credit expansion (cheap money) for the accumulation of capital goods by saving, there would not be poverty in the world". (Ludwig von Mises, Planning for Freedom)

At The Times, there are columnists and there are columnists with chutzpah, such as Anatole Kaletsky and David Aaronovitch, both of whom feature quite prominently in my book.

They are still in stonking form. Thus Kaletsky seems to dare you to look back at his previous columns, presumably in the hope that you won’t. On 15th December he tells us that a year ago he wrote repeatedly for a government-led Plan B which “was duly implemented in January and February". Hence in January Kaletsky wrote “I believe that the global credit crisis, far from taking a turn for the worse, is now almost over". His current excuse (15th December) is that the Bush Administration sabotaged Plan B in September. (Surely it should have been all over by then, though.) Three days later he tells us that “bankers and borrowers need cosseting in the soft eiderdown of zero interest rates". Yet only savers (who abstain from consumption for the sake of capital formation) can shorten the recession, caused as always by guess what – cosseting borrowers. Instead Kaletsky accuses savers of refusing to invest in “productive assets". The trouble here is not only that any savers left are dying from years of cosseting borrowers. Productive capital is similarly scarce and will remain so until boom-time malinvestment is cleared and saving is allowed to flourish... [Click 'read more' to continue]