Meltdown (book)
Encyclopedia
Meltdown is a 2009 book on the global financial crisis of 2007–2010 by historian Thomas Woods
Thomas Woods
Thomas E. "Tom" Woods, Jr. is an American historian, economist, political analyst, and New York Times-bestselling author. He has written extensively on the subjects of American history, contemporary politics, and economic theory...

, with a foreword by Rep. Ron Paul
Ron Paul
Ronald Ernest "Ron" Paul is an American physician, author and United States Congressman who is seeking to be the Republican Party candidate in the 2012 presidential election. Paul represents Texas's 14th congressional district, which covers an area south and southwest of Houston that includes...

. Woods is a follower of the Austrian School
Austrian School
The Austrian School of economics is a heterodox school of economic thought. It advocates methodological individualism in interpreting economic developments , the theory that money is non-neutral, the theory that the capital structure of economies consists of heterogeneous goods that have...

 of economics and believes in allowing the market to freely compete in currency
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...

, which he believes would lead to mostly gold-based currency
Gold standard
The gold standard is a monetary system in which the standard economic unit of account is a fixed mass of gold. There are distinct kinds of gold standard...

. The book is dedicated to Murray Rothbard
Murray Rothbard
Murray Newton Rothbard was an American author and economist of the Austrian School who helped define capitalist libertarianism and popularized a form of free-market anarchism he termed "anarcho-capitalism." Rothbard wrote over twenty books and is considered a centrally important figure in the...

 and Ron Paul
Ron Paul
Ronald Ernest "Ron" Paul is an American physician, author and United States Congressman who is seeking to be the Republican Party candidate in the 2012 presidential election. Paul represents Texas's 14th congressional district, which covers an area south and southwest of Houston that includes...

. The book debuted at #16 on the "Hardcover, non-fiction" New York Times Best Seller list
New York Times Best Seller list
The New York Times Best Seller list is widely considered the preeminent list of best-selling books in the United States. It is published weekly in The New York Times Book Review magazine, which is published in the Sunday edition of The New York Times and as a stand-alone publication...

, and advanced to the #11 spot in its second week on the list. According to the author's official website, Meltdown was on the NYT Best Seller list for 10 weeks.http://www.thomasewoods.com/books/meltdown/

Woods' thesis maintains that: deflation of prices neither causes nor prolongs depressions
Depression (economics)
In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe downturn than a recession, which is seen by some economists as part of the modern business cycle....

; deflation may be necessary to prevent depressions or to bring depressions to an end; the Fed is the primary cause of business cycles via its arbitrary and coercive control of the money supply
Money supply
In economics, the money supply or money stock, is the total amount of money available in an economy at a specific time. There are several ways to define "money," but standard measures usually include currency in circulation and demand deposits .Money supply data are recorded and published, usually...

; and trying to cure these credit cycle
Credit cycle
The credit cycle is the expansion and contraction of access to credit over the course of the business cycle. Some economists, including Barry Eichengreen, Hyman Minsky, and other Post-Keynesian economists, and some members of the Austrian school, regard credit cycles as the fundamental process...

s with more government intervention will not work.

Woods argues that government intervention in the form of support for housing
United States housing bubble
The United States housing bubble is an economic bubble affecting many parts of the United States housing market in over half of American states. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and may not yet have hit bottom as of 2011. On December 30, 2008 the...

 and excessive monetary expansion caused the current crisis. By creating an illusion of wealth (that certain resources exist which do not exist), interventions encourage wasteful investments and unsustainable consumption, instead of productive investments. The proposed cures (bailouts, more money creation
Money creation
In economics, money creation is the process by which the money supply of a country or a monetary region is increased due to some reason. There are two principal stages of money creation. First, the central bank introduces new money into the economy by purchasing financial assets or lending money...

, and stimulus spending) will just make matters worse. No business is really too big to fail
Too Big to Fail policy
"Too big to fail" is a colloquial term in regulation and public policy that refers to businesses dealing with market complications related to moral hazard, macroeconomics, economic specialization, and monetary theory....

, he says, even large financial institutions. For them, as for other businesses, liquidation
Liquidation
In law, liquidation is the process by which a company is brought to an end, and the assets and property of the company redistributed. Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation...

 is preferable to a bailout from the perspective of the larger economy.

According to Woods, the depressions of the 19th century were caused by banks (various state banks and the Second Bank of the United States
Second Bank of the United States
The Second Bank of the United States was chartered in 1816, five years after the First Bank of the United States lost its own charter. The Second Bank of the United States was initially headquartered in Carpenters' Hall, Philadelphia, the same as the First Bank, and had branches throughout the...

) issuing paper money, supposedly convertible to gold, in amounts greatly exceeding their gold reserves.

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