Is this what is wrong with the current economy?

Awhile back, I wrote on the dismal state of economic knowledge. This lack of understanding is never more evident than in an economic crisis such as we now have.

Several weeks ago I happened to be watching TV. I believe it was CNN - which I never watch but I was at someone elses home who had it on. Some guy was talking about the current crisis. I very much wish I would have written his name down and took notes so that I could be more specific than I am able to be.

He was talking about how some experts have said this collapse was coming for quite some time. He said, until now, most 'experts' just thought these guys were crazy. Now it turns out they knew what they were talking about.

My immediate thought was that yes, the Autstrian School economists (and those of similar inclinations that may go by various names) have for years explained the business cycles and particularly huge drawn out recessions/depressions such as the one from 1929 to ~1942. These guys have stated again and again how we are going down the same road that led us to that disaster (only it is worse now because more and more of the obstacles on that road have been removed) and the result will be a depression even worse than that.

The problem is the market is not allowed to work. Government intervenes through regulation, through monetary policy, (including now the removal of the gold standard that at least we still had in 1929), Keynseyen (sp??) spending, jerking around interests rates, etc. The Austrians would argue that this government intervention into the natural economy is what causes the huge and drawn out crises.

Sure, in any economic system there will be countless contiunous 'little crises'. If you lose your job, that is a crisis and no type of economic system can guarantee that you will always have a job. However, a planned economy (where the government tries to control the whole economy) leads to economy wide crises. Just read the current headlines to see the result.

So, naturally, I assumed that this was what the CNN reporter was getting at. Planned economy, debased currency, all encompassing economic policy is what got us here. Some experts have said this for years, now it is coming true. The answer is to shrink government and reduce (almost to the point of elimination) its effect on the economy.

But, NOOOOOOO that is not what this guy was saying. He went on, and I paraphrase, but this is a very accurate paraphrase: "One thing we know for sure is that we can no longer just let the free market rule. That is what we have been doing and it has led us into this mess. We must have more regulation and control."

Does this guy live in the same universe that I do? We have had a free market up to now?

This of course was the exact same argument that has been used for eighty years now concerning the Great Depression. We had a free market. It began to crumble. Hoover refused to do anything thinking the free market would work. It crashed. FDR came in and instituted economic policies which led us out of the depression. Hurray for FDR. Hurray for our government saviour. Boo freedom.

However as Murray Rothbard showed conclusively in his book "America's Great Depression" this is not at all accurate. We were hardly a 'free market" in the years leading up to 1929. Hoover increased government intervention drastically (to the point that FDR ran against Hoover's 'big government' philosophy. FDR was clueless what to do. The result? Unemployment was higher in 1938 than it was in 1932 when FDR too over.

I don't know about you, but all that sounds familiar to me. We have not been in a free economy in my lifetime. Bush, in the face of bad economic indicators has tremendously increased government intervention, but is going down in history as a 'do nothing.' Obama is our FDR/Messiah. What will this all look like four, five or six years down the road.

I shudder to think.

However, I can't think for long, I have to go look for a job.