Book: Ron Paul vs. Paul Krugman: Austrian vs. Keynesian economics in the financial crisis

A popular view of the crisis is that it was caused by an over-exuberant free market. Due to a lack of government regulation, the market went wild, driven purely by greed and a thirst for immediate profits, without regard for the long-term consequences.

The problem with this view is that it bears no relationship with reality. The truth is that the Federal Reserve system itself was the fundamental cause of the crisis, and that it was the perverse incentives created by Fed policy and the government’s policy of encouraging homeownership that caused the bubble.

The government has an interest in concealing this truth from the public. After all, naturally, politicians are reluctant to acknowledge their own mistakes, and, after all, the Fed is a government-legislated private monopoly over the supply of currency. And by keeping interest rates lower than they otherwise would be, the Fed helps to finance exuberant government spending by keeping its debt repayments lower.”

Jerry R. Hammond, author of the book.