Meltdown

**Author:** Thomas E. Woods Jr. **Estimated Reading Time:** 45 minutes

**What You'll Learn:**

Why the 2008 financial crisis was not a failure of free markets but a predictable consequence of decades of government intervention. You will understand how central banking, government-sponsored enterprises, and political lending mandates combined to create an unsustainable boom, and why the proposed solutions made the underlying problems worse.

**Who This Book Is For:**

Anyone who sensed that the standard explanation of the financial crisis felt incomplete. Readers who want to understand the deeper causes of boom and bust cycles, the role of the Federal Reserve, and why government interventions that claim to fix economic problems so often prolong them.

In the autumn of 2008, the global financial system appeared to be collapsing. Major banks teetered on the edge of failure. Stock markets plunged. Governments around the world scrambled to respond with bailouts, stimulus packages, and emergency lending facilities. The conventional explanation for what happened arrived quickly and settled into the public consciousness with remarkable speed. The story went something like this: unregulated financial markets, driven by greed and reckless speculation, had spun out of control. Banks made irresponsible loans. Wall Street created complex financial instruments nobody understood. Regulators had been asleep at the wheel, and the result was the worst economic crisis since the Great Depression. The solution, we were told, was more regulation, more oversight, and more government intervention. Thomas Woods looked at this explanation and found it profoundly unsatisfying. Not because he doubted that greed existed on Wall Street, but because the explanation failed to answer the most important question: what had changed? Greed, after all, is a constant feature of human nature. It existed in the 1950s, the 1980s, and the 1990s. If greed alone could cause financial crises, we would have them constantly. Something specific had to have changed in the years leading up to 2008 to produce such a spectacular collapse. The answer, Woods argues, lies not in the absence of government intervention but in its presence. The crisis was not caused by markets being too free. It was caused by markets being systematically distorted by government policy. The housing bubble, the explosion of risky lending, the excessive leverage in the financial system, and the eventual collapse were all predictable consequences of specific government actions taken over decades. Consider the role of the Federal Reserve. After the dot-com crash of 2000-2001, the Fed pushed interest rates down to historically low levels, holding them at 1 percent for an extended period. This was not a market outcome. It was a deliberate policy decision. The result was a flood of cheap credit into the economy, credit that had to go somewhere. Given the…