A human tragedy unfolds:

BRITAIN is facing a bankruptcy timebomb with a record number of individuals and companies predicted to go bust this year.

Begbies Traynor, the insolvency and restructuring group, reckons more than 35,000 firms could go under this year – equivalent to more than 95 a day. The figure would be 18% higher than during the previous peak in the 1990s crash. Nick Hood at Begbies said he would not be surprised if the number rose to 40,000 by the end of the year.

via Bankrupt Britain: 340 people go bust every day – Times Online .

We must ask ourselves why this is happening. One answer is within the Hayek lecture I summarized yesterday as follows:

In fact, the very measures recommended as a remedy for unemployment — raising aggregate demand — have become the source of a large-scale misallocation of resources which is likely to make later large-scale unemployment inevitable. Continuously injecting additional amounts of money where it creates temporary demand, together with an expectation of continuously rising prices, draws labour and resources into use in areas which will last only as long as the supply of new money. These policies bring about not so much a raise in the level of employment, but a distribution of employment which cannot last and which eventually can only be maintained by ruinous levels of inflation. The position is precarious, in which we cannot prevent substantial unemployment from reappearing. Unemployment is not deliberately brought about to combat inflation; it is a deeply regrettable but inescapable consequence of mistaken policies as soon as inflation [that is, growth in the money supply,] ceases to accelerate.

What a mess we have been dropped in. Answers are available, but will we have the courage to consider them?

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