1. With few exceptions, our academic departments of economics are scandalously corrupt.  They are divorced from logic, pay little heed to their subject (i.e., the human being), are wrapped up in statistical and mathematical reasoning that obfuscates the true nature of the science, and have a poor epistemological base of analysis.  In other words, while I initially found it hard to believe that nobody saw this mess coming, after investigating the neo-classical orthodoxies that pollute our institutions, there is little wonder why they were caught off guard.  (Note: there are some good economics departments, such as that at George Mason University.)
2. (Good) economics is the study of human action, and develops its theorems by deduction through logic.  The seminal axiom is that man acts to achieve his goals.  The entire discipline is traceable back to this self-evident proposition.  Thus, its conclusions are true in all places, for all time.
3. In order to understand the more salient points of economic reasoning, one must have a clear understanding of the role of money.  Money (and monetization) allow for economic calculation of trade-offs, profit and loss accounting, finance and inter-temporal coordination.  After pursuing a good definition of money and its manifold functions, I cannot recommend, as many may have anticipated, Milton Friedman as a guide.  I would instead urge anyone interested in this line of thinking to begin with Frederic Bastiat’s “Maudit Argent!,” its English translation, “What is Money?”
4. Banking has a oft-nefarious history that has, surprisingly, made me ever-so-slightly sympathetic to the scorn cast upon its practitioners by the envious left.  I suffer from no blind eye when it comes to big business collusion with government, and so it was little surprise to learn that banking interests have sought (and achieved) protection from loss by influencing legislation.  The most recent, glaring example in our history is the Federal Reserve system, which effectively socializes banking losses through inflation (or, to be blunt, government sanctioned counterfeiting).  Long before this, however, banks had achieved a legal monopoly on a special category of fraud – or, from the industry argot, fractional reserve banking.  Because of the abstract nature of this concept, and the many ways to rationalize this activity as something other than fraud, most people do not even think twice about the fact that their deposits are lent out without their knowledge in multiples of 10-100x, if they’re even aware of it.   This used to result, periodically, in “runs on the bank,” which was in essence a customer check against too-lax lending.  In addition to bank runs, the gold standard enforced honest accounting (compared to fiat money), and rival banks regularly exercised their right to call their loans against their more brazen competitors, providing another important check on overly-exuberant bankers.  FDR changed all this permanently by attacking the gold standard, forbidding gold to be held in private hands (thankfully this has since been repealed), and creating the FDIC – a perfectly bankrupt government “insurance” program that can in no way provide deposit insurance except by continued inflation, ending the threat of bank runs.
5. The cause of the business cycle is the reduction of the nominal interest rate by monetary expansion.  This causes consumption habits to be skewed toward the present and the capital base – i.e., the productive means – of the economy to be eroded.  Capital accumulation is undermined, and many long term, capital intensive projects that would otherwise prove unprofitable are given the illusion of profitability (e.g., home construction).  The price mechanism is gravely injured by the resulting asset bubble, and out of this develops the cluster of errors that periodically plague large, industrialized economies.
6. Government has an incentive to protect their banking friends, because it gives an air of legitimacy to their profligate spending (as opposed to naked monetary inflation).  And so it is that the government issues debt that is purchased by banks, and ultimately backed by the money-creating entity, the Federal Reserve.  The banks fund the government, and the government provides tax-funded insurance to the banks.  It is a neat system that has little resemblance to a free market, and strains my ability to find anything inherently moral or even practical for the public at large.  Without a gold standard there is literally no check on inflationary policy except public opinion.
7. There is nothing the government can do it “plug” the problems created by monetary expansion, though they will undoubtedly look to do so because to admit impotence would likely have as a corollary accepting blame for initiating the crisis in the first place.  Any further monetary expansion or deficit spending (Keynesianism) will do nothing to address the underlying reasons for economic correction.  Prices must fall relative to each other, and interference will only lengthen the correction period.  Worse, unrelenting monetary expansion will end in a currency collapse.  Only a fool would play with such fire – a fire that would be the economic equivalent of everyone in the country suddenly being unable to communicate for a number of weeks.  Yet this is exactly what neo-classical, demand oriented economics prescribes.  Lamentably, neo-classical economists are, in this respect, on par with V.I. Lenin, who advised that to undermine a capitalist society the most promising means was currency debauchment.
8. Both parties appear ignorant of some basic economic truths, although only the Democratic party can be called socialist.  And they are, no doubt, intent on ending capitalism in the United States, whether they are cognizant of this fact or not.

It’s certainly an uphill battle, and against some powerful and well-funded interest groups, but the tax-payers must somehow regain control over the federal government.  Replacing this group of Democrat Marxists with ill-informed Republicans may not be enough.  There does need to be some fundamental changes in Washington, because the public is not going to tolerate many more failures of what they perceive as a “free market” before growing desperate.

The co-opting of banks by the gov’t is not exactly a new phenomenon, but I believe it could reach a crisis point in the not-so-distant future.  Combined with ever-increasing national debt, this diabolical collusion is threatening our dollar.  What happens when, in the midst of “the greatest crisis since the Great Depression,” we experience 20%, 30%, 50% inflation?  The infamous 70′s stagflation looks rosy by comparison, that’s what.  …I’d rather not be around for that.