Robert Higgs on The Government’s Fear and Ratchet Effect

Last night at the NYC Junto, Robert Higgs who is an author, economist and historian spoke about our current situation. In summary, we are on the Titanic. If America’s spending, taxing, regulatory, and entitlement trends do not radically change then expect extremely low to negative real economic growth, more political tension and higher inflation. Nothing has been done to reduce or eliminate risks in the financial system. In fact, banks are more concentrated and the Fed has shown it will intervene in any way possible. Economic and financial uncertainty reigns.

The trend is toward more government control (Obamacare, FEMA, Ignoring/Eliminating the US Constitution, etc.). The government creates the crisis through negative real interest rates which cause massive malinvestment, the economy crashes, then the government blames Wall Street, greedy speculators and the lack of regulation. Then more controls are put in place, the economy slows, more stimulus, a manipulated boom occurs, then an inevitable bust-repeat as necessary.

Expect 1970s markets and inflation. The nominal price of stocks may go up, but the real price won’t. Expect MUCH MORE volatility.

He goes into more detail here:


How the government uses to fear to increase its power

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