One margarita good; 300 margaritas even better.

My final example of the differences between the [Keynesian and Austrian] schools is the prescription for restoring prosperity. The Keynesians believe that you need to increase the money supply, and now it appears there is no limit on the amount of money to be created. They also believe that there should be stimulus spending by the government, and that too seems now to be unlimited. As part of the stimulus, this spending should be financed by borrowing to increase the deficit and national debt, and this too now seems to be unlimited — whatever is necessary to get the job done.

Austrians view all of these so-called remedies as harmful impediments to the process of economic readjustment. This readjustment is necessary to correct for the malinvestments that occurred during the prior boom (i.e., the housing bubble). The Great Depression, the stagflation of the 1970s, the longstanding weakness of the Japanese economy, and the current crisis all stand as testament to the correctness of our view. The correct view is that government should get out of the way, cut taxes and the size of its own agencies and regulatory bureaucracies, restore a good environment for entrepreneurs, and allow markets to work. Most importantly, government should adopt the principles of sound money. We need to restore the gold standard — which [Joseph] Salerno has written about at great length — close down the Federal Reserve, and return the operation of money and banking back to the marketplace.

Any way you cut it, the more government strays from legitimate government functions in pursuit of policy goals dreamed up by planners, do gooders, and wise men -- but which goals are tenuously rooted in the realities of human behavior -- the more freedom is diminished and the more chaotic public affairs become.

“Money: Sound and Unsound.” By Mark Thornton on December 3, 2010. This excerpt is from an edited transcript of a Mises Circle speech [link is to audio version] given 11/13/10, in review of Joseph Salerno's Money: Sound and Unsound (emphasis added).

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