Woods Says Free Market ‘Not Guilty as Charged’
By Brooke Bellah
Dr. Thomas Woods, the outspoken and controversial author of 10 best-selling books, came to campus Wednesday night to speak about the country’s current economic crisis.
Woods is a nationally recognized economist and historian who has appeared on multiple news outlets, including MSNBC and Fox News.Although Woods’ ideas are controversial, he is well-respected in intellectual circles and has briefed Congress about his concerns regarding the Federal Reserve. Woods is an advocate of the free-market economy and criticizes the federal government’s response to the economic crisis, claiming that the increased spending created by the stimulus package will serve only to create more problems in the future.
Since the recession, there has been a backlash against the free-market system and its supporters. In response to this, Woods replies that the government has “misdiagnosed the problem.” The main cause of the recession, he says, is the irresponsible policies established by the Federal Reserve.
He explains it this way: Businesses will invest in long-term production when interest rates for loans are low. What causes low interest rates? People do, when they begin saving their money and not investing it.
In a pure free-market system, when people are not buying products, businesses release resources (such as employees), and those resources are then distributed to other levels of industry. This creates expansion in those industries. The process happens naturally, without any need for outside involvement, Woods says.
According to Woods, when the Federal Reserve artificially lowers interest rates, this creates an interruption within the system. In short, it creates a “tug-of-war” among industries. For example, the agricultural industry would be competing with factories and so on.
In 2001, the Federal Reserve lowered interest rates 11 times in an attempt to boost the economy. Woods says that this plan worked in the short term, but it made the impending financial crisis worse than it would have been.
In response to country’s current economic crisis, the federal government is increasing its regulation of the market and has created a $200 billion-plus stimulus package to encourage economic growth. Where did it get the money? Much of it was printed on credit or borrowed from other countries, such as China.
Woods calls this solution a temporary fix, like trying to use a Band-Aid to cover a gaping wound. Asked what his predictions are for the country if it continues in this direction, Woods answers, “I am an optimist, but I believe the best we can hope for is stagnation, on a European model.”
So what does he feel needs to be done in order to fix the economy?
“It’s not what should be done, but who should be doing it,” Woods says. He believes that entrepreneurs should be the ones investing, not the government. With Congress continually adding restrictions on the market, investors are too spooked to spend money right now, he says.
Woods stayed afterward to answer questions and sign copies of his books.
He is the author of “Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked and Government Bailouts Will Make Things Worse,” “Nullification: How to Resist Federal Tyranny in the 21st Century” and “The Politically Incorrect Guide to American History.” He is currently touring the country, speaking at different venues.
For more on Woods, go to www.tomwoods.com.