It is, furthermore, too late for gradualism. The only solution was set forth by F.A. Hayek, the dean of the Austrian School, in his critique of the similarly disastrous gradualism of the Thatcher regime in Great Britain. The only way out of the current mess is to “slam on the brakes,” to stop the monetary inflation in its tracks.

Then, the inevitable recession will be sharp but short and swift, and the free market, allowed its head, will return to a sound recovery in a remarkably brief time. Only a drastic and credible slamming of the brakes can truly reverse the inflationary expectations of the American public. But wisely the public no longer trusts the Fed or the federal government. For a slamming on of the brakes to be truly credible, there must be a radical surgery on American monetary institutions, a surgery similar in scope to the German creation of the rentenmark which finally ended the runaway inflation of 1923. One important move would be to denationalize the fiat dollar by returning it to be worth a unit of weight of gold. A corollary policy would prohibit the Federal Reserve from lowering reserve requirements or from purchasing any assets ever again;Introduction xxiii better yet, the Federal Reserve System should be abolished, and government at last totally separated from the supply of money.

It should be obvious to everyone but the most dedicated adherent of Keynesianism that the stimulus did not accomplish its end. The combination of outright spending by Congress, the desperate schemes to reflate the housing market, the attempt to transfuse bleeding firms with other people’s money, and the creation of trillions in artificial money, has not done a thing to lift the US economy.

Actually, the reverse has been true. All these efforts have prevented the adjustment of economic forces to the post-boom world. And all the resources that the stimulus consumed were extracted from the private sector, for we must always remember that government has no resources of its own. Everything it does must come from the hides of private producers and the citizenry in general, in the future if not immediately.