Book Cover America's Great Depression - Rothbard

February 2020 Book of the Month: America’s Great Depression by Murray Rothbard

Book of The Month

“This book attempts to fill a gap by inquiring in detail into the causes of the 1929 depression from the standpoint of correct, praxeological economic theory” – Murray Rothbard[i]

The narrative of the Great Recession of 2007 to 2009 sounds a lot like this:

… the “evil” capitalist banks for reasons unknown all started to give “bad” loans to the unsuspecting public.  Somehow everything went south and the entire housing market collapsed.  This somehow led to a stock market crash and countless bankruptcies across the country.  It was so bad that the government and the Federal Reserve had to bail out the some, but not all of the banks who created the problem.  They also had to bail out some but not all corporations as well.  We should be glad for the Federal Reserve and the brave men and women who saved the world by slashing interest rates and ultimately giving several trillions of dollars to some of the richest people in the world.  If they didn’t act the way they did then things would have been much worse.  How bad things would have gotten no one knows for sure, but it would have been really bad…

There is something terribly wrong with this narrative and I want you to consider who gave you these ideas, then ask yourself if you have ever read a book on the boom-bust cycle or on the Great Depression before?

If you only get to read one book about the Great Depression, then Murray Rothbard’s America’s Great Depression is that book!  This is a great introduction to understanding the Austrian business cycle explained through Rothbard’s sincerity, wit, erudition of economic history and care for the reader.  He’s similar to Mises in that he can take seemingly complex topics and explain them in simple terms to the reader, such that anyone who has never taken an economics class before would be able to understand the book in its entirety.

You will also be able to see into the nature of the Federal Reserve from an academic’s perspective who is not beholden to them.  As you continue further you’ll discover that contrary to what you’ve been told there is nothing new about the Fed’s “unconventional monetary policies” or “quantitative easing.”  According to the mainstream narrative this expansion of the Fed’s balance sheet is something that seems to have only occurred just over the last decade but the book shows that this is not the case.  Also consider that the Fed has a history dating back to over 100 years, but how many academics have adequately studied it from the Austrian perspective?  Rothbard filled this void in 1963 when the book was published and it remains just as relevant almost 60 years later.

Rothbard writes in simple terms because he wants to educate readers; he does not try to belittle them through using difficult terms or shows any sign of hubris.  The introduction alone will give you a glimpse into what is in store for the rest of the book:

The chief impact of the Great Depression on American thought was universal acceptance of the view that “laissez-faire capitalism” was to blame. The common opinion—among economists and the lay public alike—holds that “Unreconstructed Capitalism” prevailed during the 1920s, and that the tragic depression shows that old-fashioned laissez-faire can work no longer. It had always brought instability and depression during the nineteenth century; but now it was getting worse and becoming absolutely intolerable. The government must step in to stabilize the economy and iron out the business cycle. A vast army of people to this day consider capitalism almost permanently on trial.[ii]

With Rothbard and the other Austrian authors, you’ll finally discover that there is an economic school that you can relate to.  You feel that you can “trust” them because they are not trying to convince you of their dogma or orthodox economic beliefs.  The answers, if true, should be simple and shouldn’t require absurd leaps of faith, assumptions or models to explain.

For those who like to see data, there are various figures noted in the appendices, however I favour the tables located thought the book which show the various money supply, deposits and essentially the Fed’s balance sheet during the time period.  As noted above, we have been told that this expansion of the balance sheet is something new and inventive, but this has actually has been going on since the inception of the Fed.

The “danger” with reading Rothbard is that once you do, you will never go back to reading Milton Friedman again.  Yes, Friedman did many great things for the free market, however Rothbard understood the money supply, Austrian economics, and the dangers of central banking; this cannot be said about Friedman.  It is sad in the sense that most books by Austrian economists were buried by the mainstream academic community because they could not provide a cohesive argument against free market principles, but thanks to the Mises Institute you can download this book for free or purchase at a low price.

Lastly, for those new to Austrian economics you will get to see the word “inflation” used in its original and still most appropriate way, see below:

There is no need, for example, for deflation (lowering of the money supply) during a depression. The depression phase begins with the end of inflation, and can proceed without any further changes from the side of money[iii]

If you love liberty and freedom, if you want to discover the truth in economics and if you want to read from an economist who speaks honestly to you, then you’ll love this book, Rothbard and Austrian economics.



[i] Murray Rothbard, America’s Great Depression, (Auburn, The Ludwig von Mises Institute, 2000), xliii.

[ii] Ibid., xxxvii.

[iii] Ibid., 14.

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