[ChicagoMark]

Originally Posted by danb

Since we've rejected liberal protectionism, the inevitable recessions we always face have been shorter and shallower, just like right thinking economists have been saying since the time of von Mises and Hayek.

von Mises and Hayek would be the most outstanding opponents of our current economic condition and both would be preparring for a depression. Our response to recessions since the 80's has been to lower interest rates and create massive amounts of money and credit. Two things both those great minds warned us about. One of von Mises' great contribution was demonstrating that a prolonged period of ever greater money and credit creation results in a "Crack-up Boom"; a boom phase where all is well until it falls apart in a collapse or "crack-up", which is what started in August of last year. This recession will be long and severe....and probably we be called a depression, even though there are no offical stats that define a depression.

Governments can reduce the rate of interest in the short run. They can issue additional paper money. They can open the way to credit expansion by the banks. They can thus create an artificial boom and the appearance of prosperity. But such a boom is bound to collapse soon or late and to bring about a depression.
- Ludvig von Mises
Omnipotent Government p. 251

"There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved."
- Ludwig von Mises