I just finished reading Meltdown by Thomas E. Woods Jr, or as I know him from his podcast, The Tom Woods Show, Tom Woods. This book was published in 2009, while I was a junior in high school, soon after the housing market collapsed. Almost a decade has gone by since “The Great Recession” and with the stock market hitting record highs, I figured now is a great time to read this book.
It took me nearly two weeks to complete, but that’s not the book’s fault. I had a pair of job interviews, my 25th birthday, and began a new job all within that time frame, so I did not spend as much time reading as I would have liked.
I studied economics in college and had a (very) brief stint in the mortgage industry soon after college, so this book spoke my language. But you don’t have to be an econ major or mortgage underwriter to understand the points the author is making. Tom Woods does a very good job putting things in layman’s terms. Tom Woods is very good at that, which is why I am such a big fan of his.
The book is centered around The Great Recession and offers an explanation of why it happened. Woods introduces the reader to the Austrian business cycle (ABC) theory and illustrates that the Federal Reserve is the primary culprit responsible for the boom and bust pattern of the American economy. He does this by using facts, “more dollars [were] created between 2000 and 2007 than in the rest of [American] history,” Ludwig von Mises’s parable of the bricks, and other examples of central planning gone wrong to illustrate his points.
A particularly interesting part of the book is the chapter devoted to money, the origin of, manipulation of, and the need for a sound system of. Woods makes a point to defend capitalism, which has been on trial since 2008 (for forever really).
The current system of fiat money, coupled with fractional reserve lending, bank bailouts, and a centrally planned money supply can hardly be called capitalism, whose name, Woods argues, should be cleared of the charge of causing the Recession.
Toward the end of the book Woods makes a great case for the use of commodity money and takes the time to debunk common arguments against using a gold standard. Arguments like, “Precious metals are too bulky,” “A gold standard is too costly; paper money is less expensive to produce,” “We need money that is more flexible,” are dissected by the author. I wish I had read this book during my Money and Banking class, I highly recommend it to all M&B students, and econ students in general.
It would be remiss of me if I didn’t mention the misallocation of resources when writing about a book based on ABC. In an economy, just like in life, it is best to let your bad investments fail instead of throwing perfectly good resources at it. If you have a failing book blog that you know you will never get what you want out of, stop throwing time and energy at it, and focus your time and energy on something that will get you what you want. If your automakers mismanaged their companies then allow them to stew in the mess they made. Let them crash, and let someone who is better at it fill in their shoes. Like Mise’s parable of the bricks, the sooner the problem is acknowledged the less you spend trying to fix it, and the quicker the needed recovery (reallocation of resources) will be.
As much as it seems a credible doomsday prediction I actually enjoyed reading this book. It tells an account of a major event that occurred as I was growing up. It references YouTube videos of Peter Schiff getting laughed at for accurately predicting the collapse of the mortgage market before it happened. And it looks like it’s happening again.
It’s not always fun. There are growing pains. But an economy hopped up on low interest rates and an unbacked currency will come back to reality whether we’re ready for it or not.