The Return of the Great Depression Buy Now

Vox Day is not buying the current prognostications on the part of many that the United States has hit bottom economically and that we are in a nascent recovery. In "The Return of the Great Depression", he forecasts that, unfortunately, we are in for a contraction somewhat worse than the one our forebears endured eighty years ago.

Day tells the story of how we arrived at our present pass, examining the subprime mortgage crisis and the role of artificially low interest rates and relaxed lending standards in that crisis. He also casts doubt on some of the economic statistics the government releases and offers his reasons for doubting them.

The book delivers a great primer on the differences between Keynesianism, the Chicago School (monetarism), and the Austrian School, and describes how each school views the role of the money/credit supply in an economy.

One of the fundamental tenets of Austrian economics is the view that the severity of an economic contraction is correlated to the volume of malinvestments in the economy prior to the crash. President Obama responded to the recent downturn by injecting massive amounts of useless spending into the economy. He appears to desire to become the American version of Pierre Elliott Trudeau--introduce massive amounts of new spending and government programs and hope that taxes, including both income taxes and a GST or VAT, are eventually raised to pay for them. This massive spending of 2009 and 2010 (on top of Bush's more modest stimulus in 2008) will lead to much higher levels of malinvestment in an economy that already had very high levels of malinvestment in 2008 due to the subprime mortgage crisis.

This leads Day to his conclusion that we are headed for a second Great Depression. He outlines six different scenarios, from very optimistic to very pessimistic, of where the economy is headed and ranks the likelihood of each scenario. He of course thinks that a depression is most likely and explains his reasons for predicting deflation instead of predicting inflation as some Austrian economists are. Day even predicts where the Dow Jones Industrial Average will bottom out in 2012 or 2013.

I am sympathetic to many aspects of Austrian economics, but I fervently hope that Vox Day's prediction is wrong. However, if many of today's Keynesians and monetarists are incorrect about their predictions of recovery, we cannot say that we were not warned that Great Depression II was at the door.Get more detail about The Return of the Great Depression.