The Wall Street Journal has an opinion piece today about Ludwig von Mises.  It is well worth the read and then it would be well worth the effort to do a little more research on Mises and his Austrian school of economics.

I'm sure most people have heard of John Maynard Keynes.  He's the "brilliant" economist who is the father of the government stimulus. 

 ...along came John Maynard Keynes's tome "The General Theory of Employment, Interest and Money" in 1936. Keynes was dapper, fresh and sophisticated. He even wrote in English! And the guy had chutzpah, fearlessly fighting the battle against unemployment by running the currency printing press and draining the government's coffers.

He was the anti-Mises. So what if Keynes had lost his shirt in the stock-market crash. His book was peppered with fancy math (even Greek letters) and that meant rigor, modernity. To add insult to injury, Mises wasn't even refuted by Keynes and his ilk. He was ignored.

Ludwig von Mises wrote his book "The Theory of Money and Credit" back in 1912, just one year before our Federal Reserve was born.  Unfortunately, his book, written in German, really didn't get much play.  It explained exactly why something like the Federal Reserve would eventually lead to ever more volatile business cycles. 

This is the best, to the point, analysis of his theory and is very relevant to our current situation:

Government-imposed interest rates artificially below rates demanded by savers leads to increased borrowing and capital investment beyond what savers will provide. This causes temporarily higher employment, wages and consumption.

Ordinarily, any random spikes in credit would be quickly absorbed by the system-the pricing errors corrected, the half-baked investments liquidated, like a supple tree yielding to the wind and then returning. But when the government holds rates artificially low in order to feed ever higher capital investment in otherwise unsound, unsustainable businesses, it creates the conditions for a crash. Everyone looks smart for a while, but eventually the whole monstrosity collapses under its own weight through a credit contraction or, worse, a banking collapse.

The system is dramatically susceptible to errors, both on the policy side and on the entrepreneurial side. Government expansion of credit takes a system otherwise capable of adjustment and resilience and transforms it into one with tremendous cyclical volatility.

It reminds me of the academic debate between communism and capitalism.  Even after seeing the Soviet Union do a 70 year long experiment with total government control and seeing it fail, many still think that more government control is the path to work towards.

So now that we've been following the path of Keynes for the past 70 years and have seen how it has failed, many still think that more of the same is what is needed.  More government stimulus and more government borrowing.  Hopefully our system won't collapse like the Soviet Union.  Unfortunately, it will probably take a collapse in order to get back to a system that works.