Driving back from the Mises Circle at Newport Beach, I am left with a fairly decent quantity of information to disect. During the lectures, David Gordon offered his opinion on the “five best books on the current crisis”. I present them here to you, with their respective editorial reviews on the Mises Store website.
1. Murray Rothbard’s What Has Government Done to our Money?
“The Case for a 100 Percent Gold Dollar” was written a decade before the last vestiges of the gold standard were abolished. His unique plan for making the dollar sound again still holds up. Some people have said: Rothbard tells us wh
at is wrong with money but not what to do about it. Well, by adding this essay, the problem and the answer are united in a comprehensive whole.
After presenting the basics of money and banking theory, he traces the decline of the dollar from the 18th century to the present, and provides lucid critiques of central banking, New Deal monetary policy, Nixonian fiat money, and fixed exchange rates. He also provides a blueprint for a return to a 100 percent reserve gold standard.
The book made huge theoretical advances. He was the first to prove that the government, and only the government, can destroy money on a mass scale, and he showed exactly how they go about this dirty deed. But just as importantly, it is beautifully written. He tells a thrilling story because he loves the subject so much.
The passion that Murray feels for the topic comes through in the prose and transfers to the reader. Readers become excited about the subject, and tell others. Students tell professors. Some, like the great Ron Paul of Texas, have even run for political office after having read it.
Rothbard shows precisely how banks create money out of thin air and how the central bank, backed by government power, allows them to get away with it. He shows how exchange rates and interest rates would work in a true free market. When it comes to describing the end of the gold standard, he is not content to describe the big trends. He names names and ferrets out all the interest groups involved.
Since Rothbard’s death, scholars have worked to assess his legacy, and many of them agree that this little book is one of his most important. Though it has sometimes been inauspiciously packaged and is surprisingly short, its argument took huge strides toward explaining that it is impossible to understand public affairs in our time without understanding money and its destruction.
2. Douglas French, Early Speculative Bubbles & Increases in the Money Supply.
The Housing Bubble was hardly the first in human history. What’s eluded historians is the same issue that eludes commentators today: the underlying cause.
This book is the first (and only) book to solve the mystery of the most famous bubble in world history: Tulipmania in 17th century Netherlands. It Is a legendary event but explanations have been lacking. People blame irrational exuberance, free markets, and an unleashed aristocracy.
Douglas French takes a different route: he follows the money, to prove that the bubble resulted from a government intervention that dramatically exploded the money supply and fueled the tulip-price bubble – not altogether different from modern bubbles.
This book was French’s master’s thesis written under the direction of Murray Rothbard examining three of the most famous speculative bubble episodes in history through the lens of Austrian Business Cycle Theory.
Although each of these episodes is well documented, this book examines the monetary interventions that engendered each of these events showing that not only the Mississippi Bubble and the South Sea Bubble were caused by government meddling, but Tulipmania as well.
Tulipmania was unique in that it was the sound money policy of the Dutch combined with free coinage laws that led to an acute increase in the supply of money fostering an atmosphere that was ripe for speculation and malinvestment, manifesting itself in the intense trading of tulip bulbs.
The author also examines not only the Mississippi Bubble but the life and monetary theories of its architect, John Law. Professor Joe Salerno calls Law the world’s first macroeconomist who implemented a Keynesian monetary system in France nearly two hundred years before Keynes was born. At the same time across the English Channel, a nearly bankrupt British government looked on with envy at Law’s system, believing that he was working a financial miracle. It was anything but and investors in both countries were devastated.
Although these episodes occurred centuries ago, readers will find the events eerily similar to today’s bubbles and busts: low interest rates, easy credit terms, widespread public participation, bankrupt governments, price inflation, frantic attempts by government to keep the booms going, and government bailouts of companies after the crash.
When we will learn? We first have to get the cause and effect in the history straight. This book is an excellent contribution to that effort.
3. Robert Murphy, Politically Incorrect Guide to the Great Depression and the New Deal.
Myths about the Great Depression were once a mere annoyance. Now they have become a source for tyranny. The Bush-Obama response to the meltdown proves that one thing is certain: until we get the history of the 1930s right, liberty will be under threat of those trying to repeat the drama.
Thank goodness Robert Murphy has come along to straighten out the mess in a way that everyone can understand. In this hard-hitting book, we find the most accessible and most truth-telling book about the Great Depression and the New Deal that has ever been written.
Free-market economists have been working for decades to make the record of the calamity clear. This book may just be the magic bullet we’ve been looking for to kill off the myths before they kill us.
He puts together in one easy package the research of hundreds of scholars, showing that it was not capitalism that failed in 1929 but the boom times created by Fed credit expansion. Murphy takes aim at the Chicago School economists and the Keynesians who continued to be in denial on this central point.
A particularly great feature here for Austrians dealing with monetarist myths: Murphy explains that the deflation in the 1930s didn’t have to be somehow devastating. It was not egregious by historical standards, and was fully compatible with economic growth. In fact, the Fed tried but failed to flood the economy with money in the 1930s. Here Murphy provides a very compelling explanation of fractional-reserve banking and its effect on the supply of money.
He further shows that Hoover was not a free-market president. His policies were so statist that he might as well have been a Soviet agent. His biggest critic, who blasted him for his spending and centralization, was none other than FDR. But once FDR came to power, he enacted the longest string of cockamamie, prosperity-killing measures of any president in American history.
The economy still hadn’t recovered going into World War II, a war that didn’t help the economy or get us out of the Great Depression. It prolonged the government-made pain.
Murphy dissects the real history here with facts, analysis, clear prose, suggestions for further reading, fantastic quotations from all the main players, and even when he is discussing complicated data, he never leaves the reader behind.
Murphy concludes his book by recounting what led to the current crash. And wraps it all up with an excellent criticism of Bush-Obama and predicts that their policies will prolong problems.
This book appears as part of Regnery’s “Political Incorrect Guide” series but, in fact, this account is not biased in any particular direction. It is just good history, accurate history, truth-telling history that we have to know to navigate the treacherous waters of today’s economic and political environment.
4. Tom Woods, Meltdown
Why the heck is this happening to us? What happened to mortgages, to banks, to large retailers, to retirement savings, to stock prices, to the availability of credit? How could so many errors have coincided?
To the media pundits and government officials, this is a market failing that requires the government to take trillions of dollars from you and run the money presses full time. Otherwise we are doomed.
But there is another way to look at the great market collapse of 2008: the whole thing, including the bubble that preceded it, is the fault of the government and the Fed. All attempts to “fix” the problem are like forcing the patient to swallow more of the poison from which he currently suffers.
Mises.org has been making this argument, and warned of the coming crash years ago. But where can you find the argument explained for the average person in a convenient package, without technical jargon and with logic and facts?
Enter Tom Woods with his blockbuster book Meltdown. It’s all here, all the information you need to understand what is happening and what to do about it. It is billed as a free-market response to the crisis but it is more precisely an Austrian School response.
He covers the problem of housing subsidies, of low interest loans, of the absurdities of the boom times, and how it was inevitable that they would come to an end. He puts the fault right where it belongs: with the government and the central bank.
He further blasts the political establishment for taking exactly the wrong path in response. Interest rates should be raised, not lowered. Government spending should be cut, not increased. Tax should be reduced. Regulations should be cut, not expanded. On the current path, the bozos in Washington are going to wreck whatever hope for recovery there is.
The great thing about this volume is that it is rooted in serious ideas. We aren’t talking about some quicky investment book by a media talking head. Professor Woods is steeped in the ideas of Mises, Hayek, and Rothbard, and never misses a chance to explain the relationship between theory and reality. It contains what might be the clearest explanation of Austrian business cycle theory ever written.
This book is a fantastic weapon in the intellectual battle that is taking place right now. It needs to become a bestseller, and it could. You can do your part by distributing it as widely as possible. History really does hang in the balance.
5. Ron Paul, End the Fed.
A blast against central banking this powerful hasn’t been seen since the 19th century. The Fed itself has never been subjected to such a whithering critique. And it is from a man who has been fighting the Fed his entire political career. in fact, several chapters here provide documentary evidence of Congressman Paul’s own verbal exchanges with Chairman Greenspan and Chairman Bernanke.
What is especially impressive here is that Paul’s book goes far beyond old-time populist attacks on the banking elites. He understands Austrian theory as well as anyone, and he has learned from Mises and the whole of his tradition. So here we find patient explanation of the workings of the Fed and how it has distorted the legitimate business of banking, through every manner of intervention.
The political analysis in here is sound but expected. The theoretical analysis is the robust part, and something that few politicians in U.S. history could have provided. In this sense, Ron Paul is unique: courage in public service combined with intellectual rigor. This combination has made him a machine in opposition to the Fed, and this is by far his best presentation of the subject.
It turns up the heat on the Fed as never before. He shows that the central bank bears a large responsibility for the creation of the Leviathan state. It has wrecked our money, funded ghastly wars, and made possible the creation of the social welfare state that is bankrupting us financially and making the population dependent on the state. It has given rise to economic crisis and turmoil of all sorts.
Paul also offers a realistic plan for abolishing the Fed, if not immediately then with incremental steps to reduce its power and eliminate its dominance in American economic life.
Paul wrote this book as a personal statement. But it serves two additional purposes. It educates. And it inspires toward effective action.
