Rothbard, from the final chapter of his book “For a New Liberty”:It should be noted that Bionic is for the most part discussing the business cycle and government debt. As far as the business cycle goes, it should remembered that it is a boom and bust cycle. As long as the Fed stops printing everyonce and awhile, for a bit, before serious price inflation develops, there is no reason it can not continue the boom-bust cycles for decades, perhaps centuries (See, for example, 1929, 1979-80, 2008) . There need be no ultimate collapse.
“Indeed, we can confidently say that the United States has now entered a permanent crisis situation, and we can even pinpoint the years of origin of that crisis: 1973–1975. Happily for the cause of liberty, not only has a crisis of statism arrived in the United States, but it has fortuitously struck across the board of society, in many different spheres of life at about the same time.”This was almost forty years ago – and it has been more than forty years since Nixon dumped gold. Yet, “the creativity and shell game trickery of the central planners” has found no limits. In the grand sweep of economic history, is 2008 a bigger shock than 1971? I think not. In a couple of centuries, when the follies of this time are chronicled, which chapter will get more attention? Yet the world has continued spinning, for 42 years and counting.[...]To close on a positive note: this will eventually end, as it must – with a breakdown of the state and centralized control. It just may not be as fast as many advertise or hope, but it is certain to come.
That said, the Fed has been able to get away with a lot more money printing than other central banks because the dollar is an international reserve currency. If foreign central banks choose to no longer add to their dollar postilions and indeed liquidate the positions they hold, this could bring on a massive collapse of the dollar with serious price inflation repercussions in the US. It could feel very much like a final collapse.
But there is much more to the economy than just monetary policy. Serious problems can arise in a number of ways. Unemployment is higher now in the US for a number of reasons, from minimum wage laws to the government, through unemployment payments, providing incentive for people to not work. All this stagnates the economy.
In another part of the economy, Obamacare will stagnate the healthcare sector.
Perhaps, the most dangerous thing that could occur is if price inflation heats up because of more Fed printing or foreigners dumping dollars (or both). If the response to climbing prices is the government instituting price controls, it could be very destructive to the economy and bring the economy to very low levels. Products could literally disappear off the shelves within days. Again, another situation where the economy could feel very much like in a final collapse.
It will be specific circumstances, though, as to how bad the economy gets and why. There is nothing that guarantees a final collapse.
Bottom line; There are many problems that could develop in the economy because of government interventions, some worse than others. Hardly any will lead to what could be thought of as a final collapse, but most will result in serious deterioration in the standard of living for most Americans. What most think of as a final collapse, say along Soviet Union style, is unlikely to occur in the US until things get much, much worse. The global dollar overhang is probably the most dangerous threat right now. That could turn into a problem tomorrow or 10 years from now. However, it is the growing intervention in all aspects of the economy that is most likely to lead to a final collapse as the economy is suffocated, but this remains far off--much, much decline will occur first.
I should add that another serious problem could develop if interest rates rise dramatically and force the government to increase its borrowing significantly. At that point, the Fed will be pressured to buy eve more Treasury debt with newly printed money. This will make it even more difficult for the Fed to create periods of slow money growth and could result in accelerating price inflation, leading to a fast deterioration of the economy.
Also, as a commenter below has pointed out, the expanding cost of entitlement programs is likely to add to Treasury borrowings, making it difficult, from this direction, for the Fed to slow money printing.