Book of the week

The current crisis has been given a myriad causes and reasons, many of them are just simply wrong. Most ideological explanations, when pressed against the reality of the situation shatter into no more than ideological voodoo.

Thomas Woods' book Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and the Government Bailout Will Make Things Worse is by far the most rational explanation of the current crisis. The Austrian Business Cycle, which Woods uses in this book has withstood the test of the historical application. From 14th century Venice to the current economic problems, Austrian Business Cycle (ABC) fits.

As most view the bust as the problem, it limits their analyse of the situation. ABC looks at not only the bust but what preceded it, the boom. The real problem resides in the boom as malinvestment increases because of manipulations of the interest rates under the market rate. The bust, is the market trying to recalibrate the economy and wash away the malinvestment.

Woods' book makes a logical and convincing case and uses historical event to further justify his explanation of the current crisis. It is without a doubt, a must read that will change your outlook on the business cycle forever.