Why Markets Are Rallying as Millions Become Unemployed

The year 2006 seems like a lifetime ago. The housing boom seemed to be going full throttle, but danger lurked. I wrote on LewRockwell.com in March of that year, concerning a Las Vegas real estate seminar, that “nary a discouraging word was spoken.”

There are many who use the coronavirus crisis to blame freedom to trade for the current epidemic. And, of course, there are those who are already arguing for autarky, closing our borders, and producing everything locally.

[This text is excerpted from the introduction to The Anatomy of the Crash, a Mises Institute ebook to be released in April 2020.] The Great Crash of 2020 was not caused by a virus. It was precipitated by the virus, and made worse by the crazed decisions of governments around the world to shut down business and travel. But it was caused by economic fragility.

In the early days of the outbreak, pundits rushed to the ramparts of Twitter to proclaim that “there are no libertarians in a pandemic.” However, this glee at the apparent failure of markets was soon dashed as more evidence accumulated showing that government intervention was actually the main impediment to success.

Unlike the federal government, state and local governments in America can’t just create money out of thin air. So when tax revenues go down, that money is simply not available to the state legislatures and city councils anymore. These governments either have to borrow the money or raise taxes and hope the tax hike itself doesn’t cause total revenue to fall.

On Wednesday, April 1, the acting prime minister of Barbados, Hon. Santia Bradshaw, came on the local news station to announce a mandatory partial shutdown to combat COVID-19. She announced that starting April 3, all “nonessential” businesses would remain closed until midnight April 14.

The US economy is imprisoned, most of the population is under house arrest, and the inmates in Washington are running the asylum. And yet while the nation appears to be walking the green mile, investors residing in the Wall Street cell block have been extended pardons from the market gods.

My oldest turned seventeen last month. To commemorate the occasion, she and I watched Once Upon a Time in Hollywood. I’d taken her to her first (allegedly) rated-R movie a couple years ago to see the quite good Baby Driver, but this was Tarantino.