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America's Great Depression
Applied Austrian economics doesn't get better than this. Murray N. Rothbard's America's Great Depression is a staple of modern economic literature and crucial for understanding a pivotal event in American and world history.
The Mises Institute edition features, along with a new introduction by historian Paul Johnson, top-quality paper and bindings, in line with the standard set by The Scholars Edition of Human Action.
Since it first appeared in 1963, it has been the definitive treatment of the causes of the depression. The book remains canonical today because the debate is still very alive.
Rothbard opens with a theoretical treatment of business cycle theory, showing how an expansive monetary policy generates imbalances between investment and consumption. He proceeds to examine the Fed's policies of the 1920s, demonstrating that it was quite inflationary even if the effects did not show up in the price of goods and services. He showed that the stock market correction was merely one symptom of the investment boom that led inevitably to a bust.
The Great Depression was not a crisis for capitalism but merely an example of the downturn part of the business cycle, which in turn was generated by government intervention in the economy. Had the book appeared in the 1940s, it might have spared the world much grief. Even so, its appearance in 1963 meant that free-market advocates had their first full-scale treatment of this crucial subject. The damage to the intellectual world inflicted by Keynesian- and socialist-style treatments would be limited from that day forward.
368 pages, Paperback
First published January 1, 1963
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About the author
Murray N. Rothbard
283 books1,116 followersMurray Newton Rothbard was an influential American historian, natural law theorist and economist of the Austrian School who helped define modern libertarianism. Rothbard took the Austrian School's emphasis on spontaneous order and condemnation of central planning to an individualist anarchist conclusion, which he termed "anarcho-capitalism".
In the 1970s, he assisted Charles Koch and Ed Crane to found the Cato Institute as libertarian think tank.
In the 1970s, he assisted Charles Koch and Ed Crane to found the Cato Institute as libertarian think tank.
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Displaying 1 - 30 of 121 reviews
September 10, 2011
This is a torrid love letter to laissez faire economics sure to raise a fiscal chubby on fans of the Austrian School of Economics (ASE). Of course, if limited government (i.e., NONE), free markets (i.e., unrestrained capitalism) and non-intervention with the money supply (i.e., the Federal Reserve must go) are not under-pinnings of your own economic beliefs, or (i.e., the ASE is just not your bag), this book may cause hives and periodic bouts of severe chafing. I kept a jumbo jar of Aloe next to me while reading in case I started to itch.
Now, if you're not entirely sure what your tolerance for the invisiblefist hand of laissez faire is, I’ve included the following excerpt from the book which should be more than adequate to help you test your relative placement along the spectrum of economic theory:
PLOT SUMMARY
This is one of the classics of the Austian School written by one of its staunchest proponents. In it, Rothbard sets forth the foundational tenets of ASE philosophy and then ruthlessly applies them against what he describes as the disastrous actions of the government from 1921-1933. Actions that he argues led inexorably to, and greatly extended, the Great Depression.
Rothbard traces the inflationary practices of the Federal Reserve (which the ASE despises and considers the earthly manifestation of SATAN) beginning in 1921 and argues that the Fed's manipulations of the money supply and its artificial expansion of available credit was a root cause of the factors that would eventually lead to the Great Depression. Rothbard explains that when money and credit become too easy to obtain, the market spends the money unwisely and it leads to an over supply of unneeded assets (the BOOM) that must eventually be liquidated (the BUST). The arguments made by Rothbard are more expansive and far more detailed, but that is the gist.
Rothbard then turns to President Herbert Hoover and the gloves come off as he presents a scathing indictment that places the vast majority of the blame for the depth, breadth and duration of Great Depression squarely at the feet of what Rothbard calls the "interventionist" policies of the Hoover administration. Rothbard begins his historical smack down by debunking the commonly held view that President Hoover was a hands off, free market supporter and that it was his adherence to the principals of “laissez faire” that led to the onset of the Great Depression. Rothbard argues that this is 180 degrees wrong and goes to great lengths to demonstrate how the “do nothing” President had both hands up to the elbow inside the economy trying to manipulate the market.
This chronicle of the Hoover adminstrations policies takes up the last half of the book and is incredibly well laid out and pretty nasty. Among Hoover’s many “interventionist” mistakes, Rothbard discusses:
FINAL THOUGHTS
For me, I couldn't buy off on all of his assertions but that has nothing to do with the presentation of Rothbard's work in this book. I found his case well laid out and it was obvious that he has a firm command of his subject matter. He appeared just as comfortable discussing macro philosophical principals as he was applying those principals to a specific historical example.
Overall, this was an interesting, thorough analysis of the causes of the Great Depression from a perspective I had not previously encountered. It is certainly worth checking out by anyone with an interest in economic history and philosophy whether or not you end up drinking the kool-aid and buying off on Rothbard's conclusions.
4.0 stars. Highly Recommended (unless you begin to chafe).
Now, if you're not entirely sure what your tolerance for the invisible
If government wishes to alleviate, rather than aggravate, a depression, its only valid course is laissez-faire – to leave the economy alone. Only if there is no interference, direct or threatened, with prices, wage rates, and business liquidation will the necessary adjustment proceed with smooth dispatch.Now take a moment to examine yourself for any severe physiological changes and you should have a good idea of where you reside in relation to the Austrian School.
Any propping up of shaky positions postpones liquidation and aggravates unsound conditions. Propping up wage rates creates mass unemployment, and bolstering prices perpetuates and creates unsold surpluses.
Moreover, a drastic cut in the government budget – both in taxes and expenditures – will of itself speed adjustment by changing social choice toward more saving and investment relative to consumption. For government spending, whatever the label attached to it, is solely consumption; any cut in the budget therefore raises the investment-consumption ratio in the economy and allows more rapid validation of originally wasteful and loss-yielding projects.
Hence, the proper injunction to government in a depression is cut the budget and leave the economy strictly alone.
PLOT SUMMARY
This is one of the classics of the Austian School written by one of its staunchest proponents. In it, Rothbard sets forth the foundational tenets of ASE philosophy and then ruthlessly applies them against what he describes as the disastrous actions of the government from 1921-1933. Actions that he argues led inexorably to, and greatly extended, the Great Depression.
Rothbard traces the inflationary practices of the Federal Reserve (which the ASE despises and considers the earthly manifestation of SATAN) beginning in 1921 and argues that the Fed's manipulations of the money supply and its artificial expansion of available credit was a root cause of the factors that would eventually lead to the Great Depression. Rothbard explains that when money and credit become too easy to obtain, the market spends the money unwisely and it leads to an over supply of unneeded assets (the BOOM) that must eventually be liquidated (the BUST). The arguments made by Rothbard are more expansive and far more detailed, but that is the gist.
Rothbard then turns to President Herbert Hoover and the gloves come off as he presents a scathing indictment that places the vast majority of the blame for the depth, breadth and duration of Great Depression squarely at the feet of what Rothbard calls the "interventionist" policies of the Hoover administration. Rothbard begins his historical smack down by debunking the commonly held view that President Hoover was a hands off, free market supporter and that it was his adherence to the principals of “laissez faire” that led to the onset of the Great Depression. Rothbard argues that this is 180 degrees wrong and goes to great lengths to demonstrate how the “do nothing” President had both hands up to the elbow inside the economy trying to manipulate the market.
This chronicle of the Hoover adminstrations policies takes up the last half of the book and is incredibly well laid out and pretty nasty. Among Hoover’s many “interventionist” mistakes, Rothbard discusses:
** Hoover's "voluntarism" which Rothbard decries as nothing more than massive government coercion of the country’s leading companies to “maintain wage rate, expand construction and cooperate regarding allocating reduced work.”All of these actions Rothbard argues had the opposite effect from what the Hoover administration intended and led the United States into the worst economic downturn in its history. The analysis and the support for his position is cogent and if not always engaging. Whether it is persuasive or not I will leave to you as much of the answer to that question will depend on what you bring with you to the reading.
** Pushing for the passage of the Smoot-Hawley Tariff which had a significantly negative effect on international trade just as the economy was in decline.
** Weakening bankruptcy laws which allowed unsustainable companies to continue to operate rather than being able to redeploy their assets into more productive endeavors.
** Encouraging the Federal Reserve (i.e., SATAN) to expand credit, reduce interest rates and bolster shaky financial positions, thus continuing to encourage bad investments and speculation.
** Pressuring Employers’ to maintain current levels of employment and not make required layoffs.
** Imposing limits on immigration and deported illegal aliens (Hoover was hoping to reduce unemployment by “reducing supply” in the available workforce.
** Pushing for laws limiting the hours construction workers on Federal projects could work per day.
** Publicly condemning short selling and supporting legislation banning the practice.
** Enacting one of the largest tax increases in history while the U.S. economy was tanking.
FINAL THOUGHTS
For me, I couldn't buy off on all of his assertions but that has nothing to do with the presentation of Rothbard's work in this book. I found his case well laid out and it was obvious that he has a firm command of his subject matter. He appeared just as comfortable discussing macro philosophical principals as he was applying those principals to a specific historical example.
Overall, this was an interesting, thorough analysis of the causes of the Great Depression from a perspective I had not previously encountered. It is certainly worth checking out by anyone with an interest in economic history and philosophy whether or not you end up drinking the kool-aid and buying off on Rothbard's conclusions.
4.0 stars. Highly Recommended (unless you begin to chafe).
June 3, 2024
2023-04-06 Considering what has played out over the last year or so with:
- major increases in prices, due to the massive Gov't spending for Covid policies and
- Federal Reserve creation of extra money to pay for it (in lieu of taxes), then
- the Fed's massive raising of interest rates to combat the "inflation" (rise in prices), but now
- the inevitable outcome of Bank failures and other business failures -
perhaps it is time to review and reread this classic book again?
2022-06-27 Just saw a talk on the Great Depression that picked up on one of the same themes of the Great Depression (GD) that this book covered, but this book was not referred to. So I thought that it is long overdue for me to review it here.
I read this in college or shortly thereafter (~1976-80). Rothbard did a great job of explaining what business cycles are about, various theories that try to deal with them and the key one created by Ludwig Mises, and to some extent Friedrich Hayek, called the Austrian Theory of the Business Cycle (ATBC).
The key history of the Federal Reserve Board's manipulation of the money supply in the 1920s is explained as well as the Smoot Hawley Tariff and measures that Herbert Hoover and Congress took to deal with the Stock Market crash of 1929 and subsequent business depression.
The facts of all the interventions in the market that Hoover took, contradicting the pervasive myths that have tainted most everyone's "understanding" of Hoover's "doing nothing" about the depression are exposed.
This book lays the original cause of the depression on the Fed's doorstep and the depth and length (up through 1932 only!) and insanity about all this on Hoover. Depending on the edition of this book one reads, you will get appropriate introductions that bring the ATBC's powers of explanation to bear on most "recent" recessions (60s, 70s and 80s). What a tour de force and enlightening addition to the original book.
Highly recommended.
Caveat: The book's analysis of the GD was wonderful for the causes and through the Hoover years. But what the heck happened to the FDR years?????????????? Amazing to me that Rothbard stopped the book at the end of 1932 and did not continue with FDR's unconscionable continuation and huge expansion of Hoover's terrible policies/programs along with his own even worse policies and their exacerbating and lengthening the miseries and ill effects of the GD. Far too many of those policies continue to plague us today, such as Social Security and the expansion of so many government agencies' powers.
- major increases in prices, due to the massive Gov't spending for Covid policies and
- Federal Reserve creation of extra money to pay for it (in lieu of taxes), then
- the Fed's massive raising of interest rates to combat the "inflation" (rise in prices), but now
- the inevitable outcome of Bank failures and other business failures -
perhaps it is time to review and reread this classic book again?
2022-06-27 Just saw a talk on the Great Depression that picked up on one of the same themes of the Great Depression (GD) that this book covered, but this book was not referred to. So I thought that it is long overdue for me to review it here.
I read this in college or shortly thereafter (~1976-80). Rothbard did a great job of explaining what business cycles are about, various theories that try to deal with them and the key one created by Ludwig Mises, and to some extent Friedrich Hayek, called the Austrian Theory of the Business Cycle (ATBC).
The key history of the Federal Reserve Board's manipulation of the money supply in the 1920s is explained as well as the Smoot Hawley Tariff and measures that Herbert Hoover and Congress took to deal with the Stock Market crash of 1929 and subsequent business depression.
The facts of all the interventions in the market that Hoover took, contradicting the pervasive myths that have tainted most everyone's "understanding" of Hoover's "doing nothing" about the depression are exposed.
This book lays the original cause of the depression on the Fed's doorstep and the depth and length (up through 1932 only!) and insanity about all this on Hoover. Depending on the edition of this book one reads, you will get appropriate introductions that bring the ATBC's powers of explanation to bear on most "recent" recessions (60s, 70s and 80s). What a tour de force and enlightening addition to the original book.
Highly recommended.
Caveat: The book's analysis of the GD was wonderful for the causes and through the Hoover years. But what the heck happened to the FDR years?????????????? Amazing to me that Rothbard stopped the book at the end of 1932 and did not continue with FDR's unconscionable continuation and huge expansion of Hoover's terrible policies/programs along with his own even worse policies and their exacerbating and lengthening the miseries and ill effects of the GD. Far too many of those policies continue to plague us today, such as Social Security and the expansion of so many government agencies' powers.
September 13, 2013
I am deeply skeptical of the "Austrian School" of economics so I felt it important to start reading a bit more about it, if for no other reason to help sharpen my arguments against it. In that role, this book largely succeeds. It is dated, and a serious adherent to the philosophy might point me elsewhere to catch up (and I'll be poking around), but it is still clear and relevant.
The book, fairly succinctly, makes the case that it is government intervention in the markets, and only government intervention, that drives the boom-and-bust business cycle and economic depressions are purely a product of the (presumably unintended) consequences government action. Well, that is clearly nonsense, but if you are willing willing to prune through some of the arguments you can learn a lot that is, I think, true.
Where the book fails to make its case is it never really considers the role of World War I in creating the global economic imbalances of the 1920s. It blows right by the possibility that most cataclysmic of events could have shaped the economic destiny of the ensuing decades, particularly in Europe where they struggled under the enormous load of war debts to America. The book also never hints at the role of fraud in the build-up of the stock market in the 1920s - everything is laid at the feet of the "easy money" policy of the federal reserve and at the rah-rah boosting of sentiment by government officials. Never mind that the easy money policy Rothbard so deplores was executed to support the gold standard he so strongly believes in! Neglecting these does serious harm to credibility of his thesis.
His polemics against fractional reserve banking are border-line delusional. That is an institution that is never going away - indeed, without it, we simply could not finance the industrial society we live in today and life would collapse to the standards of the eighteenth century. We, as a civilization, have decided the occasional cost of bank runs is well worth the long-term benefit, thank you.
The most amusing failure though is the assertion that economic theory cannot be judged by how well it matches data - it can only be judged by its logical internal consistency and by how appealing its arguments are! While it is true that economic data is terrifically complex, and easy to misinterpret (and is often misinterpreted willfully to meet an agenda), you simply cannot assert your theories are exempt from the scrutiny of real data. Of course, Rothbard goes on to ignore this restriction and applies every economic statistic he can that could possibly support his thesis and either quietly ignores everything else or points to them as confounding features actually driven by other factors that he doesn't need to explain because they are too complex!
All that said, the book is still worth reading both (a) to help to understand Austrian School adherents (who have a lot of sway today with the push for austerity) and (b) because he does make some good points with respect to government intervention in markets. He lists a series of devastating critiques of the Hoover administrations attempts at price-fixing and shows how often that backfires. He also convincingly demonstrates that "make-work" programs that don't add real economic value cannot succeed (so don't believe people when they tell you the government should pay people to dig holes and then fill them) and that propping up input costs (like labor) in the face of falling prices can have very negative consequences if business can no longer remain profitable.
So - a good and important read that makes some excellent points, even if you find yourself laughing out loud occasionally.
The book, fairly succinctly, makes the case that it is government intervention in the markets, and only government intervention, that drives the boom-and-bust business cycle and economic depressions are purely a product of the (presumably unintended) consequences government action. Well, that is clearly nonsense, but if you are willing willing to prune through some of the arguments you can learn a lot that is, I think, true.
Where the book fails to make its case is it never really considers the role of World War I in creating the global economic imbalances of the 1920s. It blows right by the possibility that most cataclysmic of events could have shaped the economic destiny of the ensuing decades, particularly in Europe where they struggled under the enormous load of war debts to America. The book also never hints at the role of fraud in the build-up of the stock market in the 1920s - everything is laid at the feet of the "easy money" policy of the federal reserve and at the rah-rah boosting of sentiment by government officials. Never mind that the easy money policy Rothbard so deplores was executed to support the gold standard he so strongly believes in! Neglecting these does serious harm to credibility of his thesis.
His polemics against fractional reserve banking are border-line delusional. That is an institution that is never going away - indeed, without it, we simply could not finance the industrial society we live in today and life would collapse to the standards of the eighteenth century. We, as a civilization, have decided the occasional cost of bank runs is well worth the long-term benefit, thank you.
The most amusing failure though is the assertion that economic theory cannot be judged by how well it matches data - it can only be judged by its logical internal consistency and by how appealing its arguments are! While it is true that economic data is terrifically complex, and easy to misinterpret (and is often misinterpreted willfully to meet an agenda), you simply cannot assert your theories are exempt from the scrutiny of real data. Of course, Rothbard goes on to ignore this restriction and applies every economic statistic he can that could possibly support his thesis and either quietly ignores everything else or points to them as confounding features actually driven by other factors that he doesn't need to explain because they are too complex!
All that said, the book is still worth reading both (a) to help to understand Austrian School adherents (who have a lot of sway today with the push for austerity) and (b) because he does make some good points with respect to government intervention in markets. He lists a series of devastating critiques of the Hoover administrations attempts at price-fixing and shows how often that backfires. He also convincingly demonstrates that "make-work" programs that don't add real economic value cannot succeed (so don't believe people when they tell you the government should pay people to dig holes and then fill them) and that propping up input costs (like labor) in the face of falling prices can have very negative consequences if business can no longer remain profitable.
So - a good and important read that makes some excellent points, even if you find yourself laughing out loud occasionally.
October 21, 2008
Rothbard's great analysis of the causes of the Great Depression is one of the classics of Austrian economics and a must-read for serious libertarians. Rothbard presents conclusive evidence explaining the crucial mistakes made by Herbert Hoover and later exacerbated by FDR, that deepened and prolonged what should have been a short and sharp depression. The Federal Reserve is also fingered as the culprit that expanded credit and the money supply and created the stock market bubble in the first place.
I read it several years ago and am rereading it now for the book club meeting.
I read it several years ago and am rereading it now for the book club meeting.
January 4, 2023
Don't you hate it when you're talking with someone and they bring up the great depression and they say something weird, like, "if people didn't spend so much money we wouldn't have had such high inflation", or, "if the government had just stimulated the economy MORE (i.e. spent more money) then the depression would've ended sooner", and you think to yourself, "...what the heck are you talking about" but you also don't actually know what they're talking about so you don't say anything?
Me too. But now I kinda know what they're talking about, and I can say, "no. I disagree. But I understand your point". Thanks Rothbard.
P.S. Hopefully I've convinced you to read it. It got a bit technical, but was well thought out and can be understood at many different comprehension levels. The ideas discussed in this book come up in life more often than you think.
Me too. But now I kinda know what they're talking about, and I can say, "no. I disagree. But I understand your point". Thanks Rothbard.
P.S. Hopefully I've convinced you to read it. It got a bit technical, but was well thought out and can be understood at many different comprehension levels. The ideas discussed in this book come up in life more often than you think.
June 2, 2023
Not for the casual reader of American history, or one looking to begin economic study, but a must read for those looking to better understand economic theory and the historical account of the devastation caused by not understanding it, or its manipulation.
It is fascinating to see that politics are still the same from when this book was written, and the time it documents. The reader will read extensive explanations of Boom Bust Cycles, as well as Keynesian and Austrian economics in savings, lending and banking. Everything is stated in support of “Mises’ theory,” and it addresses fallacies that are used to support Keynesian economics.
There is also very deep detail of every foreign and domestic political action taken during the 20’s and 30’s, as well as insight into the Agricultural Cartel of the United States. It’s amazing Rothbard could compile this without the internet.
It is fascinating to see that politics are still the same from when this book was written, and the time it documents. The reader will read extensive explanations of Boom Bust Cycles, as well as Keynesian and Austrian economics in savings, lending and banking. Everything is stated in support of “Mises’ theory,” and it addresses fallacies that are used to support Keynesian economics.
There is also very deep detail of every foreign and domestic political action taken during the 20’s and 30’s, as well as insight into the Agricultural Cartel of the United States. It’s amazing Rothbard could compile this without the internet.
May 23, 2023
If you want to know the factors that caused the great depression and how the government made it worse, then this is a must read.
Read
August 9, 2022I read this book in the late 1970s (I'm guessing about 1977), along with competing analyses by Milton Friedman and John Kenneth Galbraith, among others. In my view, Rothbard's principal contribution is his demonstration that it was the deliberate governmental inflation of the money supply during the 1920s that led to the 1929 stock market crash. As President Calvin Coolidge famously said, "The business of America is business," and the Republican administrations of the 1920s did everything they could to stimulate business by using inflationary policies to create an artificial boom. The chickens came home to roost in 1929. Whether or not the Austrian School's disagreement with Keynesianism (increasing government spending and money supply during recessions and decreasing same during booms) is correct I leave to the economists. The Keynesian approach makes sense to me, but I am not an economic expert. Note that the Republican increase of the money supply during the "Roaring Twenties" was exactly the wrong thing to do under a Keynesian approach.
(originally posted March 16, 2014; final sentence added on August 9, 2022)
(originally posted March 16, 2014; final sentence added on August 9, 2022)
March 4, 2021
A must read for every economist and politician. Rothbard applies the Austrian business cycle theory to the Great Depression; illustrating how the Federal Reserve’s inflationary policies of the 1920s created a massive bubble in the stock and real estate markets, which precipitated the 1929 crash. Then Hoover started a trade war with the Smoot Hawley tariff and set wage controls in the face of deflation - which paralyzed the market adjustment and caused mass unemployment. He also embarked on public works projects, which FDR later expanded on and ultimately caused the Depression to last until the wake of WWII.
This book turns the notion of Capitalism causing the Great Depression on its head. Very relevant to what’s going on right now with Trump’s tariffs, the Fed raising rates after having them at 0% for seven years, and Bernie Sanders arguing for a $15/hr. minimum wage...
4/5 ✨
This book turns the notion of Capitalism causing the Great Depression on its head. Very relevant to what’s going on right now with Trump’s tariffs, the Fed raising rates after having them at 0% for seven years, and Bernie Sanders arguing for a $15/hr. minimum wage...
4/5 ✨
January 12, 2013
Thoroughly debunks that myth that Hoover was a laissez-faire president and that too much capitalism brought on the Great Depression. Reads like a technical banking manual at times, and Rothbard's disdain for intervention in the markets comes through at odd intervals. One criticism I have is Rothbard's constant use of AMOUNTS instead of PERCENTAGES. To explain inflation he'll say the money supply increased by X amount of dollars, rather than by X percentage, making context very difficult.
October 9, 2015
Very eye opening. I had come to the conclusion a long time ago that FDR didn't get the U.S. out of the Great Depression, that is a myth that everyone believes because we've been told over and over until we just believe it. What was eye opening was that the architect of the Great Depression was Hoover, who implemented most of the progressive ideas being championed by the democrats, and that directly led to and worsened the depression. If Hoover had not been so married to the ideas that failed for the farmers, he would not have applied them to other parts of industry and the banks. And FDR was only too eager to continue the policies that Hoover was so married to. Hoover's ambition led him to be so blind to the unfolding facts, there was no way he was going to see that he was the architect.
May 2, 2013
Difficult for me to decide on the number of stars.
5 because the ideas in this book shake the very ground I walk on.
4 because it's very technical and assumes knowledge of some economic terms.
5 because the ideas in this book shake the very ground I walk on.
4 because it's very technical and assumes knowledge of some economic terms.
October 30, 2015
In this work, Rothbard describes the sources of the crisis and same course of the crisis until Roosevelt took power. So book describes the events in the United States from the years 1921-1933. At the beginning the author explains the basics of the Austrian theory of the business cycle, and criticizes alternative explanations. Then writes the events first before the crisis, and then in its initial phase, during the reign of Hoover.
According to me, the author effectively debunks the myth of laissez-faire nature of government in this period. The crisis of 1929 was preceded by a huge inflation of credit stimulated by the government. According to Rothbard, the total money supply increased by over 60% within 8 years (mostly by increasing reserves by buying acceptances and promissory notes).
When the crisis came, Hoover was not guided by laissez-faire policies, and actively interfered in the market. Hoover willingly financed the public works and fougth deflation. But the amazing thing is that, along with a group of economists, he managed to convince business to not to reduce wages and costs. By this in the beginning of the crisis, real wages have risen since nominal wages remained stable and profits and prices were falling. There were also a redistribution of work, by reducing the number of hours (hourly rates remained at the same level) and hiring new employees. This caused even greater pressure on maintaining wages. This only extended agony of many companies, and wrong investments could not be quickly liquidated to free up capital and resources for more effective and desired by consumers activities. Hoover also involved in many other interventionist projects. Herbert Hoover opposed to only direct assistance to the unemployed by giving them benefits from the state. Instead, he preferred to "create" jobs by organizing the construction, eg. The construction of the Hoover Dam etc. Roosevelt did not create any "New Deal", he only continued and deepened Hoover's policies to combat the crisis.
Analysis of the crisis only confirms misesian cycle theory, in which a boom triggered by inflation leads to crisis. Increase in credit leads to increased investment by businesses that are not preceded by the reduction of consumption (savings). The investments that were previously unprofitable seem to profitable, which increases the demand for capital goods. This leads to an increase in their prices and after some time previous investments cease to be profitable. Then you market should eliminate bad investments. However, the government, together with the banks may delay the process by increasing inflation even further, which deepens coming crisis. Rothbard proved that the crisis affected to a much greater degree of capital goods than consumer goods, which confirms the thesis of the business cycles of Mises. Production of capital goods declined much lower than the production of consumer goods, which refutes the thesis of underconsumption and confirmed thesis of overconsumption. To consume something, first you have to produce.
The book, due to be concluded its contents is difficult, and I would not recommend it to people not familiar with the Austrian School of Economics. It is a pity that the book ends with the election of Roosevelt. I would happilly read about how Roosevelt deepened Hoover's interventionism. Before reading this book I would recommend you read other basic works such as. Works of Frédéric Bastiat and the basic work of Ludwig von Mises, and his magnum opus - Human Action: A Treatise on Economics. Without knowledge of human action do not read this book. Reading a book additionally hampered by the fact that Rothbard mentions a lot of people, organizations and laws, so sometimes you can get lost. Surprising to me was also the fact, that the author in one place seriously go wrong with counting the percentages :). Fortunately, the publisher has pointed out in a footnote.
//polish
W tym dziele Rothbard opisuje źródła kryzysu oraz sam przebieg kryzysu aż do objęcia władzy przez Roosevelta. Czyli książka opisuje wydarzenia w USA z lat 1921-1933. Na początku autor wyjaśnia podstawy Austriackiej teorii cyklu koniunkturalnego, oraz krytykuje alternatywne wyjaśnienia kryzysów. Następnie pisuje wydarzenia najpierw sprzed kryzysu, a następnie w początkowej jego fazie za rządów Hoovera.
Według mnie autor skutecznie obala mit o leseferystycznym charakterze rządów w tym okresie. Kryzys z 1929 roku był poprzedzony olbrzymią inflacją kredytu stymulowaną przez rząd. Według danych Rothbarda, łączna podaż pieniądza zwiększyła się o ponad 60% w okresie 8 lat(głównie przez zwiększanie rezerw przez skup akceptów i weksli).
Kiedy nadszedł kryzys, Hoover nie kierował się polityką laissez faire, a aktywnie ingerował w rynek. Hoover ochoczo finansował roboty publiczne i walczył z deflacją. Jednak zadziwiające jest to, że wraz z grupą ekonomistów udało mu się przekonać biznes do nieobniżania płac i obniżania kosztów. Przez to na początku kryzysu płace realne wzrosły, ponieważ płace nominalne utrzymywały się na stałym poziomie, a zyski i ceny spadały. Dochodziło także do redystrybucji pracy, przez zmniejszanie liczby godzin(stawki godzinowe utrzymały się na tym samym poziomie) i zatrudnianie nowych pracowników. To spowodowało jeszcze większe presje na nieobniżanie płac. Przez to przedłużono tylko agonię wielu firm, przez co błędne inwestycje nie mogły zostać szybko zlikwidowane, aby uwolnić kapitał i zasoby do bardziej efektywnych i pożądanych przez konsumentów działań. Hoover angażował się także w wiele innych interwencjonistycznych projektów. Herbert Hoover sprzeciwiał się jedynie bezpośredniej pomocy bezrobotnym przez dawanie im zasiłków od państwa. Zamiast tego wolał "tworzyć" miejsca pracy organizując budowy, np. budowę Zapory Hoovera itd. Roosevelt nie stworzył żadnego "Nowego Ładu", a jednie kontynuował i pogłębił politykę Hoovera w zakresie walki z kryzysem.
Analiza kryzysu potwierdza tylko misesowską teorię cyklu, według której do kryzysu prowadzi boom wywołany przez inflację. Zwiększenie kredytu prowadzi do zwiększenia inwestycji przez przedsiębiorców, które nie są poprzedzone ograniczeniem konsumpcji(oszczędnościami). Inwestycje które wcześniej były nieopłacalne wydają się opłacać, przez co zwiększa się popyt na dobra kapitałowe. To prowadzi do zwiększenia ich cen i po pewnym czasie poprzednie inwestycje przestają być opłacalne. Wtedy musi dojść do zlikwidowania błędnych inwestycji. Jednak rząd wraz z bankami może opóźnić ten proces zwiększając inflację jeszcze bardziej, przez co pogłębia się przyszły kryzys. Rothbard dowiódł, że kryzys dotyczył w znacznie większym stopniu dóbr kapitałowych niż dóbr konsumpcyjnych, co potwierdza tezy Misesa o cyklach koniunkturalnych. Produkcja dóbr kapitałowych spadła znaczniej niżej, niż produkcja dóbr konsumpcyjnych, co obala tezy o podkomsumcji, a potwierdza o nadkomsumcji. Żeby coś skonsumować, najpierw trzeba to wyprodukować.
Książka ze względu na zawierane w niej treści jest trudna, i nie polecałbym jej ludziom nie obeznanych z Austriacką Szkołą Ekonomii. Szkoda, że książka kończy się na objęciu władzy przez Roosevelta. Chętnie poczytałbym o tym, jak Roosevelt pogłębił interwencjonizm zainicjowany przez Hoovera. Przed przeczytaniem tej książki polecałbym najpierw przeczytanie innych podstawowych dzieł, jak np. prace Frederica Bastiata i podstawowe prace Ludwiga von Misesa, oraz jego opus magnum - Ludzkie działanie. Bez znajomości Ludzkiego Działania nawet nie zabierajcie się za tą książkę. Czytanie książki dodatkowo utrudnia fakt, że Rothbard wymienia w niej masę osób, organizacji i ustaw, przez co czasami można się pogubić. Zaskakujące dla mnie było także to, że autor w jednym miejscu poważnie pomylił się z liczeniem procentów :). Na szczęście wydawca zwrócił na to uwagę w przypisie. Warto wiedzieć także o tym, że wersja elektroniczna tej książki została udostępniona za darmo przez wydawcę:
http://mises.pl/blog/2012/09/09/wielk...
According to me, the author effectively debunks the myth of laissez-faire nature of government in this period. The crisis of 1929 was preceded by a huge inflation of credit stimulated by the government. According to Rothbard, the total money supply increased by over 60% within 8 years (mostly by increasing reserves by buying acceptances and promissory notes).
When the crisis came, Hoover was not guided by laissez-faire policies, and actively interfered in the market. Hoover willingly financed the public works and fougth deflation. But the amazing thing is that, along with a group of economists, he managed to convince business to not to reduce wages and costs. By this in the beginning of the crisis, real wages have risen since nominal wages remained stable and profits and prices were falling. There were also a redistribution of work, by reducing the number of hours (hourly rates remained at the same level) and hiring new employees. This caused even greater pressure on maintaining wages. This only extended agony of many companies, and wrong investments could not be quickly liquidated to free up capital and resources for more effective and desired by consumers activities. Hoover also involved in many other interventionist projects. Herbert Hoover opposed to only direct assistance to the unemployed by giving them benefits from the state. Instead, he preferred to "create" jobs by organizing the construction, eg. The construction of the Hoover Dam etc. Roosevelt did not create any "New Deal", he only continued and deepened Hoover's policies to combat the crisis.
Analysis of the crisis only confirms misesian cycle theory, in which a boom triggered by inflation leads to crisis. Increase in credit leads to increased investment by businesses that are not preceded by the reduction of consumption (savings). The investments that were previously unprofitable seem to profitable, which increases the demand for capital goods. This leads to an increase in their prices and after some time previous investments cease to be profitable. Then you market should eliminate bad investments. However, the government, together with the banks may delay the process by increasing inflation even further, which deepens coming crisis. Rothbard proved that the crisis affected to a much greater degree of capital goods than consumer goods, which confirms the thesis of the business cycles of Mises. Production of capital goods declined much lower than the production of consumer goods, which refutes the thesis of underconsumption and confirmed thesis of overconsumption. To consume something, first you have to produce.
The book, due to be concluded its contents is difficult, and I would not recommend it to people not familiar with the Austrian School of Economics. It is a pity that the book ends with the election of Roosevelt. I would happilly read about how Roosevelt deepened Hoover's interventionism. Before reading this book I would recommend you read other basic works such as. Works of Frédéric Bastiat and the basic work of Ludwig von Mises, and his magnum opus - Human Action: A Treatise on Economics. Without knowledge of human action do not read this book. Reading a book additionally hampered by the fact that Rothbard mentions a lot of people, organizations and laws, so sometimes you can get lost. Surprising to me was also the fact, that the author in one place seriously go wrong with counting the percentages :). Fortunately, the publisher has pointed out in a footnote.
//polish
W tym dziele Rothbard opisuje źródła kryzysu oraz sam przebieg kryzysu aż do objęcia władzy przez Roosevelta. Czyli książka opisuje wydarzenia w USA z lat 1921-1933. Na początku autor wyjaśnia podstawy Austriackiej teorii cyklu koniunkturalnego, oraz krytykuje alternatywne wyjaśnienia kryzysów. Następnie pisuje wydarzenia najpierw sprzed kryzysu, a następnie w początkowej jego fazie za rządów Hoovera.
Według mnie autor skutecznie obala mit o leseferystycznym charakterze rządów w tym okresie. Kryzys z 1929 roku był poprzedzony olbrzymią inflacją kredytu stymulowaną przez rząd. Według danych Rothbarda, łączna podaż pieniądza zwiększyła się o ponad 60% w okresie 8 lat(głównie przez zwiększanie rezerw przez skup akceptów i weksli).
Kiedy nadszedł kryzys, Hoover nie kierował się polityką laissez faire, a aktywnie ingerował w rynek. Hoover ochoczo finansował roboty publiczne i walczył z deflacją. Jednak zadziwiające jest to, że wraz z grupą ekonomistów udało mu się przekonać biznes do nieobniżania płac i obniżania kosztów. Przez to na początku kryzysu płace realne wzrosły, ponieważ płace nominalne utrzymywały się na stałym poziomie, a zyski i ceny spadały. Dochodziło także do redystrybucji pracy, przez zmniejszanie liczby godzin(stawki godzinowe utrzymały się na tym samym poziomie) i zatrudnianie nowych pracowników. To spowodowało jeszcze większe presje na nieobniżanie płac. Przez to przedłużono tylko agonię wielu firm, przez co błędne inwestycje nie mogły zostać szybko zlikwidowane, aby uwolnić kapitał i zasoby do bardziej efektywnych i pożądanych przez konsumentów działań. Hoover angażował się także w wiele innych interwencjonistycznych projektów. Herbert Hoover sprzeciwiał się jedynie bezpośredniej pomocy bezrobotnym przez dawanie im zasiłków od państwa. Zamiast tego wolał "tworzyć" miejsca pracy organizując budowy, np. budowę Zapory Hoovera itd. Roosevelt nie stworzył żadnego "Nowego Ładu", a jednie kontynuował i pogłębił politykę Hoovera w zakresie walki z kryzysem.
Analiza kryzysu potwierdza tylko misesowską teorię cyklu, według której do kryzysu prowadzi boom wywołany przez inflację. Zwiększenie kredytu prowadzi do zwiększenia inwestycji przez przedsiębiorców, które nie są poprzedzone ograniczeniem konsumpcji(oszczędnościami). Inwestycje które wcześniej były nieopłacalne wydają się opłacać, przez co zwiększa się popyt na dobra kapitałowe. To prowadzi do zwiększenia ich cen i po pewnym czasie poprzednie inwestycje przestają być opłacalne. Wtedy musi dojść do zlikwidowania błędnych inwestycji. Jednak rząd wraz z bankami może opóźnić ten proces zwiększając inflację jeszcze bardziej, przez co pogłębia się przyszły kryzys. Rothbard dowiódł, że kryzys dotyczył w znacznie większym stopniu dóbr kapitałowych niż dóbr konsumpcyjnych, co potwierdza tezy Misesa o cyklach koniunkturalnych. Produkcja dóbr kapitałowych spadła znaczniej niżej, niż produkcja dóbr konsumpcyjnych, co obala tezy o podkomsumcji, a potwierdza o nadkomsumcji. Żeby coś skonsumować, najpierw trzeba to wyprodukować.
Książka ze względu na zawierane w niej treści jest trudna, i nie polecałbym jej ludziom nie obeznanych z Austriacką Szkołą Ekonomii. Szkoda, że książka kończy się na objęciu władzy przez Roosevelta. Chętnie poczytałbym o tym, jak Roosevelt pogłębił interwencjonizm zainicjowany przez Hoovera. Przed przeczytaniem tej książki polecałbym najpierw przeczytanie innych podstawowych dzieł, jak np. prace Frederica Bastiata i podstawowe prace Ludwiga von Misesa, oraz jego opus magnum - Ludzkie działanie. Bez znajomości Ludzkiego Działania nawet nie zabierajcie się za tą książkę. Czytanie książki dodatkowo utrudnia fakt, że Rothbard wymienia w niej masę osób, organizacji i ustaw, przez co czasami można się pogubić. Zaskakujące dla mnie było także to, że autor w jednym miejscu poważnie pomylił się z liczeniem procentów :). Na szczęście wydawca zwrócił na to uwagę w przypisie. Warto wiedzieć także o tym, że wersja elektroniczna tej książki została udostępniona za darmo przez wydawcę:
http://mises.pl/blog/2012/09/09/wielk...
November 20, 2020
«Un mercado libre de intervenciones no generaría auges y depresiones y, enfrentado con una depresión generada con anterioridad por alguna intervención, terminaría rápidamente con la depresión y, particularmente, el desempleo. Nuestra preocupación, entonces [...] (es) el estudio de las acciones de los culpables y responsables de generar e intensificar la depresión: el gobierno.»
El Dr. Rothbard lanza luz sobre las causas de la Gran Depresión desde una visión diferente a lo comúnmente establecido. El libro comienza con una explicación magnánima sobre los ciclos económicos desde la teoría económica heterodoxa de la escuela Austriaca, haciendo base en los postulados de la praxeología Misesiana, logrando una explicación fácil de entender si se le dedica cierta atención. Se logra así preparar la base para el análisis impecable que Rothbard realiza sobre las causas de la peor crisis económica vista por el hombre.
Luego de introducirnos en la teoría, Rothbard lanza un estudio de los años 1920 a 1929, y analiza como el auge ficticio de los «roaring twenties», creado por la intervención económica del gobierno de E.E.U.U., sumado a la Reserva Federal, el banco central de Nueva York, y los bancos centrales de las principales potencias europeas (principalmente Inglaterra y Francia), con ayuda de los bancos comerciales y las asociaciones de la misma esfera, llevaron al crack del ‘29 y los subsiguientes años de decadencia económica en el mundo. En este análisis se incluye un importante estudio del proceso inflacionario, y los diversos aspectos del crecimiento de la oferta monetaria, por eso es fundamental entender el marco conceptual del principio.
El libro es también un estudio político, sobre la presidencia de Coolidge, pero principalmente sobre la de Hoover, y sus intentos por seguir expandiendo el crédito comenzada la crisis, en esto Rothbard desafía la visión tradicional de que los «liquidacioncitas» y sus ideas fueron las que predominaron durante principio de los treintas, mientras que sostiene que el «New deal» de Hoover (que preparo el camino para las medidas de Roosevelt) fue en naturaleza inflacionista, y se aplicaron medidas anti-liquidacionistas desde el principio de la crisis, expandiendo obra pública, gasto estatal, déficits presupuestarios, y el mantenimiento de los salarios. De cada uno de estos efectos Rothbard habla en detalle, y demuestra como sus efectos no solo fallaron en su objetivo, sino que incluso profundizaron la crisis.
Un libro muy completo para su corta extensión, recomendable para cualquier aficionado de la economía, o de la historia. El uso de la estadística y de hechos empíricos, sumado a los razonamientos de Rothbard, hacen la fortaleza de sus argumentos, y crean una impecable explicación de la gran depresión.
Me pregunto qué análisis haría Rothbard de la República Argentina, mi país, si pudiese observar que, llegando a los cien años desde aquella crisis, continuamos aplicando las mismas medidas contra las que el tanto predico, y que seguimos obteniendo los mismos resultados que el predijo sobre la intervención estatal de la económica: pobreza; inflación; y desocupación.
El Dr. Rothbard lanza luz sobre las causas de la Gran Depresión desde una visión diferente a lo comúnmente establecido. El libro comienza con una explicación magnánima sobre los ciclos económicos desde la teoría económica heterodoxa de la escuela Austriaca, haciendo base en los postulados de la praxeología Misesiana, logrando una explicación fácil de entender si se le dedica cierta atención. Se logra así preparar la base para el análisis impecable que Rothbard realiza sobre las causas de la peor crisis económica vista por el hombre.
Luego de introducirnos en la teoría, Rothbard lanza un estudio de los años 1920 a 1929, y analiza como el auge ficticio de los «roaring twenties», creado por la intervención económica del gobierno de E.E.U.U., sumado a la Reserva Federal, el banco central de Nueva York, y los bancos centrales de las principales potencias europeas (principalmente Inglaterra y Francia), con ayuda de los bancos comerciales y las asociaciones de la misma esfera, llevaron al crack del ‘29 y los subsiguientes años de decadencia económica en el mundo. En este análisis se incluye un importante estudio del proceso inflacionario, y los diversos aspectos del crecimiento de la oferta monetaria, por eso es fundamental entender el marco conceptual del principio.
El libro es también un estudio político, sobre la presidencia de Coolidge, pero principalmente sobre la de Hoover, y sus intentos por seguir expandiendo el crédito comenzada la crisis, en esto Rothbard desafía la visión tradicional de que los «liquidacioncitas» y sus ideas fueron las que predominaron durante principio de los treintas, mientras que sostiene que el «New deal» de Hoover (que preparo el camino para las medidas de Roosevelt) fue en naturaleza inflacionista, y se aplicaron medidas anti-liquidacionistas desde el principio de la crisis, expandiendo obra pública, gasto estatal, déficits presupuestarios, y el mantenimiento de los salarios. De cada uno de estos efectos Rothbard habla en detalle, y demuestra como sus efectos no solo fallaron en su objetivo, sino que incluso profundizaron la crisis.
Un libro muy completo para su corta extensión, recomendable para cualquier aficionado de la economía, o de la historia. El uso de la estadística y de hechos empíricos, sumado a los razonamientos de Rothbard, hacen la fortaleza de sus argumentos, y crean una impecable explicación de la gran depresión.
Me pregunto qué análisis haría Rothbard de la República Argentina, mi país, si pudiese observar que, llegando a los cien años desde aquella crisis, continuamos aplicando las mismas medidas contra las que el tanto predico, y que seguimos obteniendo los mismos resultados que el predijo sobre la intervención estatal de la económica: pobreza; inflación; y desocupación.
November 4, 2017
Read Rothbard’s America’s Great Depression. A 1963 treatise on the 1930s Great Depression and its root causes, written by this remarkable Austrian School economist. Worth reading as we seem not to learn the lessons from the past.
June 16, 2024
This was one of the most boring books I’ve gone through in awhile. Some of Rothbards other works are engaging, but this was rough. The content was ok, hence the two stars. Filter my review with the recognition that I’m not an economist.
August 27, 2025
Anyone who wishes to understand why Hoover and FDR turned what should have been a deep but short economic contraction needs to read Murray Rothbard's great book, America's Great Depression.
Rothbard begins the book with the Austrian business cycle theory. He notes that because cycles take place in the real economic world there has to be a usable cycle theory that is integrated with general economic theory. Yet, observes Rothbard, most modern economists do not even attempt such an integration and choose to concentrate on various areas of economics that do not seem to relate to others. "Only in the theories of Schumpeter and Ludwig von Mises," writes Rothbard, "has cycle theory been integrated into general economics."
For those that are not well versed in economics, Ludwig von Mises is the great figure in the Austrian School of Economics, a great and uncompromising thinker, and one of the great champions of freedom in the twentieth century. Those interested in the great man might want to look at Ludwig Von Mises: The Man and His Economics or to pick up a copy of Jörg Guido Hülsmann's wonderful book, Mises: The Last Knight of Liberalism when Amazon.ca starts to carry it. (You can find that title on the US site.)
Rothbard goes on to note that, Mises was the one economist to get it right. His theory of the business cycle meshed with the general theory of economics; it explained what must happen when governments and central banks intervene in the markets when they expand bank credit. Rothbard goes observes that, all proposed explanations that do not fit with general economics have to be rejected. That leaves Mises' theory as the only workable alternative because it is, "the only one that stems from a general economic theory, it is the only one that can provide a correct explanation."
Rothbard points out that fluctuations are common and are not a major concern because it is easy for individual businesses to miscalculate and make errors. What is of concern are error clusters that effect entire sectors and the general economy. Given the fact that entrepreneurs are in the business of forecasting and only stay in business by being prudent and generally correct, how can it be that so many entrepreneurs can be wrong at the same time? And why is it, asks Rothbard, that the capital-goods industries experience greater volatility than the consumer-goods industries?
The answer comes from Mises, who argues that the error clusters and capital-goods volatility are the result of monetary intervention in the markets, specifically bank credit expansion to businesses. In a free market economy with a given money supply, some of the money would be used for consumption and the rest would be saved and invested various orders of production. The proportion of consumption to investment would be determined by the time preferences of individuals. (This is the degree to which an individual prefers present to future satisfactions; it is the judgement made by the individual who decides if he wants to spend $1,000 on a flat screen television today or would rather wait a year because the $1,000 in savings will earn an extra $30 over the next year.) In an unhampered market, time preference shows up in the interest rate and provides much needed signals to entrepreneurs that tell them what they should do. The problem comes when central banks intervene and increase the money supply. The cheap money causes consumption to increase but lowers rate and makes long term investments in capital goods industries look profitable. But reality has to intervene and eventually the monetary expansion has to come to an end. When it does, all those investments made in 'higher order' industries far from the consumer are exposed and a crash follows.
This is why consumer goods industries suffer far less than capital goods industries during recessions; people still have to eat, shave, wash their hair, buy toothpaste, etc. But they certainly do not need to make immediate investments in expanding manufacturing capacity or demand a greater supply of steel, copper, etc.
I do not mean to linger and draw out this part but it is very important to go over it because it is critical for understanding the business cycle and why depressions happen. So I will provide Mises' explanation of the general contractor.
Mises asked us to imagine a general contractor who has at his disposal a fixed amount of bricks, the labour of a number of workers, lumber, shingles and all of the things that are needed to build a large house. Suppose, says Mises, that some assistant who was placed in charge of keeping inventory of the bricks gets the count wrong and inflates it by 20%. When the general contractor works with the architect to draw up the blueprint for the house, he overestimates the number of bricks. Because of the error,the project plan becomes unworkable; there are not enough bricks to finish the house as designed. How much is lost depends on when the error is found. If the contractor figures it out when the foundation excavation is done there isn't much waste because putting in some of the dirt back is not very difficult or labour intensive. But if the error is found later in the construction process, the loss is much larger and the house would have to be redesigned and of much poorer quality. The worst case scenario has the error discovered by the subordinates but they cover it up in the hope that the work can continue and that everyone will get paid for as long as possible. In such a case the loss would likely be total with only a small percentage of the investment being recovered through salvage operations.
Mises makes it clear that the error is one of malinvestment of resources. It isn't that the builder tried to build a big house but that he miscalculated how big of a house he could build with the resources given. This is exactly what happens when central banks print money and expand credit through the banking system. They make entrepreneurs believe that there are more resources than there actually are and projects that are begun will have to be abandoned at some point as the resources needed to build them at some planned cost do not materialize. This was what happened in the 1920s and what happened in the 1990s and 2000s when easy credit created investment bubbles that had to collapse. But for some reason the central bankers seem to have missed this lesson. They never admitted that their easy credit policies were creating malinvestments in the general economy that would have to be dealt with at some point. All they did was argue that bubbles were impossible to identify and deal with until after they popped. And the way to deal with the bubbles was to do what created them in the first place; print money and expand credit.
In the second part of the book Rothbard explains how the central bank created an inflationary boom in the 1920s by expanding the supply of money and credit and stimulating both consumption and investment all along the production chain. He explains how the increase of the money supply and a number of other factors created inflation that did not show up in the price level. Inflation, argues Rothbard, is by definition the change in the supply of money and credit and does not always show up in the price level. Think of the collapse in television set or computer prices due to the use of new and better technology even in the face of the increase in the supply of money and credit that showed up in the various general price indices. According to Rothbard, the 1920s should have had a significant price level drop much as was seen during the 19th century when productivity gains caused an increase in the purchasing power of the gold-backed dollar. The reason that such a price decline did not occur had to do with the Fed's expansion of the supply of money and credit and by changes in reserve requirements.
The third part of the book covers 1929 to 1933, when FDR and Hoover managed to turn a correction into an eleven-year long 'Great Depression.' Rothbard makes clear that the myth of Hoover as a laissez faire president who fought for free markets was false. Hoover was actually a meddler, who loved government planning and intervention. Instead of letting the economy adjust and liquidate the malinvestments, Hoover created programs to keep prices and employment high and weak industries afloat. Rothbard explains the damage done by the Smoot-Hawley Tariff, discusses the attack on property rights, and the failure of the currency as people dumped Federal Reserve Notes and redeemed them for gold. He also notes that while wages fell nominally, the Hoover policies caused them to increase by 10% in real terms. As such, no adjustments were made and the liquidation that was necessary to start the system on the road to recovery never took place. (Japan made the same error when the BoJ refused to let weak banks go under and industrial malinvestments to be liquidated. This is the reason why Japan has yet to recover.)
If there is a problem with the book it is that Rothbard ends it in 1933, when FDR took over and outdid Hoover by implementing programs that did further harm to the economy and ensured that a correction would not happen. This is why I would recommend to readers that they take a look at the books, Depression, War, and Cold War: Studies in Political Economy or Depression, War, and Cold War: Challenging the Myths of Conflict and Prosperity, in which he focuses on the issue of 'regime uncertainty,' and shows how FDRs, anti-business actions ensured that the capital formation that was necessary for a recovery did not take place.
Once the reader understands the basic economic arguments and the historical events that created the Great Depression, s/he will be better able to take steps to ensure that a similar event does not have devastating effects on one's personal future and would be more willing to consider investment classes like physical gold as a part of one's portfolio.
Rothbard begins the book with the Austrian business cycle theory. He notes that because cycles take place in the real economic world there has to be a usable cycle theory that is integrated with general economic theory. Yet, observes Rothbard, most modern economists do not even attempt such an integration and choose to concentrate on various areas of economics that do not seem to relate to others. "Only in the theories of Schumpeter and Ludwig von Mises," writes Rothbard, "has cycle theory been integrated into general economics."
For those that are not well versed in economics, Ludwig von Mises is the great figure in the Austrian School of Economics, a great and uncompromising thinker, and one of the great champions of freedom in the twentieth century. Those interested in the great man might want to look at Ludwig Von Mises: The Man and His Economics or to pick up a copy of Jörg Guido Hülsmann's wonderful book, Mises: The Last Knight of Liberalism when Amazon.ca starts to carry it. (You can find that title on the US site.)
Rothbard goes on to note that, Mises was the one economist to get it right. His theory of the business cycle meshed with the general theory of economics; it explained what must happen when governments and central banks intervene in the markets when they expand bank credit. Rothbard goes observes that, all proposed explanations that do not fit with general economics have to be rejected. That leaves Mises' theory as the only workable alternative because it is, "the only one that stems from a general economic theory, it is the only one that can provide a correct explanation."
Rothbard points out that fluctuations are common and are not a major concern because it is easy for individual businesses to miscalculate and make errors. What is of concern are error clusters that effect entire sectors and the general economy. Given the fact that entrepreneurs are in the business of forecasting and only stay in business by being prudent and generally correct, how can it be that so many entrepreneurs can be wrong at the same time? And why is it, asks Rothbard, that the capital-goods industries experience greater volatility than the consumer-goods industries?
The answer comes from Mises, who argues that the error clusters and capital-goods volatility are the result of monetary intervention in the markets, specifically bank credit expansion to businesses. In a free market economy with a given money supply, some of the money would be used for consumption and the rest would be saved and invested various orders of production. The proportion of consumption to investment would be determined by the time preferences of individuals. (This is the degree to which an individual prefers present to future satisfactions; it is the judgement made by the individual who decides if he wants to spend $1,000 on a flat screen television today or would rather wait a year because the $1,000 in savings will earn an extra $30 over the next year.) In an unhampered market, time preference shows up in the interest rate and provides much needed signals to entrepreneurs that tell them what they should do. The problem comes when central banks intervene and increase the money supply. The cheap money causes consumption to increase but lowers rate and makes long term investments in capital goods industries look profitable. But reality has to intervene and eventually the monetary expansion has to come to an end. When it does, all those investments made in 'higher order' industries far from the consumer are exposed and a crash follows.
This is why consumer goods industries suffer far less than capital goods industries during recessions; people still have to eat, shave, wash their hair, buy toothpaste, etc. But they certainly do not need to make immediate investments in expanding manufacturing capacity or demand a greater supply of steel, copper, etc.
I do not mean to linger and draw out this part but it is very important to go over it because it is critical for understanding the business cycle and why depressions happen. So I will provide Mises' explanation of the general contractor.
Mises asked us to imagine a general contractor who has at his disposal a fixed amount of bricks, the labour of a number of workers, lumber, shingles and all of the things that are needed to build a large house. Suppose, says Mises, that some assistant who was placed in charge of keeping inventory of the bricks gets the count wrong and inflates it by 20%. When the general contractor works with the architect to draw up the blueprint for the house, he overestimates the number of bricks. Because of the error,the project plan becomes unworkable; there are not enough bricks to finish the house as designed. How much is lost depends on when the error is found. If the contractor figures it out when the foundation excavation is done there isn't much waste because putting in some of the dirt back is not very difficult or labour intensive. But if the error is found later in the construction process, the loss is much larger and the house would have to be redesigned and of much poorer quality. The worst case scenario has the error discovered by the subordinates but they cover it up in the hope that the work can continue and that everyone will get paid for as long as possible. In such a case the loss would likely be total with only a small percentage of the investment being recovered through salvage operations.
Mises makes it clear that the error is one of malinvestment of resources. It isn't that the builder tried to build a big house but that he miscalculated how big of a house he could build with the resources given. This is exactly what happens when central banks print money and expand credit through the banking system. They make entrepreneurs believe that there are more resources than there actually are and projects that are begun will have to be abandoned at some point as the resources needed to build them at some planned cost do not materialize. This was what happened in the 1920s and what happened in the 1990s and 2000s when easy credit created investment bubbles that had to collapse. But for some reason the central bankers seem to have missed this lesson. They never admitted that their easy credit policies were creating malinvestments in the general economy that would have to be dealt with at some point. All they did was argue that bubbles were impossible to identify and deal with until after they popped. And the way to deal with the bubbles was to do what created them in the first place; print money and expand credit.
In the second part of the book Rothbard explains how the central bank created an inflationary boom in the 1920s by expanding the supply of money and credit and stimulating both consumption and investment all along the production chain. He explains how the increase of the money supply and a number of other factors created inflation that did not show up in the price level. Inflation, argues Rothbard, is by definition the change in the supply of money and credit and does not always show up in the price level. Think of the collapse in television set or computer prices due to the use of new and better technology even in the face of the increase in the supply of money and credit that showed up in the various general price indices. According to Rothbard, the 1920s should have had a significant price level drop much as was seen during the 19th century when productivity gains caused an increase in the purchasing power of the gold-backed dollar. The reason that such a price decline did not occur had to do with the Fed's expansion of the supply of money and credit and by changes in reserve requirements.
The third part of the book covers 1929 to 1933, when FDR and Hoover managed to turn a correction into an eleven-year long 'Great Depression.' Rothbard makes clear that the myth of Hoover as a laissez faire president who fought for free markets was false. Hoover was actually a meddler, who loved government planning and intervention. Instead of letting the economy adjust and liquidate the malinvestments, Hoover created programs to keep prices and employment high and weak industries afloat. Rothbard explains the damage done by the Smoot-Hawley Tariff, discusses the attack on property rights, and the failure of the currency as people dumped Federal Reserve Notes and redeemed them for gold. He also notes that while wages fell nominally, the Hoover policies caused them to increase by 10% in real terms. As such, no adjustments were made and the liquidation that was necessary to start the system on the road to recovery never took place. (Japan made the same error when the BoJ refused to let weak banks go under and industrial malinvestments to be liquidated. This is the reason why Japan has yet to recover.)
If there is a problem with the book it is that Rothbard ends it in 1933, when FDR took over and outdid Hoover by implementing programs that did further harm to the economy and ensured that a correction would not happen. This is why I would recommend to readers that they take a look at the books, Depression, War, and Cold War: Studies in Political Economy or Depression, War, and Cold War: Challenging the Myths of Conflict and Prosperity, in which he focuses on the issue of 'regime uncertainty,' and shows how FDRs, anti-business actions ensured that the capital formation that was necessary for a recovery did not take place.
Once the reader understands the basic economic arguments and the historical events that created the Great Depression, s/he will be better able to take steps to ensure that a similar event does not have devastating effects on one's personal future and would be more willing to consider investment classes like physical gold as a part of one's portfolio.
March 24, 2017
“America’s Great Depression” is one of the best books I’ve ever read. Arguably Murray Rothbard’s most well-known work, he presents an exhaustively sourced and detailed account of the lead-up to the 1929 stock market crash and the aftermath of this crash from 1929 to 1933. Hoover was president of the U.S. up until early 1933, so a majority of this book is about Hoover, not FDR. The first third or so of the book deals with the lead-up to the crash, which concentrates on the Coolidge presidency. Hoover, as opposed to common “knowledge” about him, was a huge interventionist. For whatever reason, we are taught that Hoover was a believer in markets that attempted to let the free market restore the economy following the stock market crash and the ensuing economic crash. This could not be further from the truth, as Rothbard illuminates.
The 1920’s was a period of significant inflation, with an average annual growth in the money supply of approximately 8%. This was also a time of large productivity gains; prices remained fairly stable despite significant monetary inflation. Rothbard breaks down the sources of monetary inflation during this period both by type and by time (he breaks down the ‘20s into twelve separate periods to evaluate what happened and how things changed throughout the ‘20s). Stable prices gave the Fed justification to continue to pump money into the economy; they masked what was a ticking inflation bomb. Large productivity gains enabled the Fed to get away with massive inflation without much hubbub from economists or the general public. The Federal Reserve Bank of New York was also involved in inflationary schemes in concert with England to ease the gold outflow from England and easy the effects of their monetary mismanagement. Rothbard details this Bank of England-Federal Reserve Bank of New York relationship and how it shaped U.S. monetary policy. Though Coolidge largely adhered to laissez faire principles, officials during his time in office certainly did not.
The real meat of the book comes with Hoover’s reaction to the 1929 stock market crash. Rothbard does a fantastic job to document all of his interventions. He attempted to prop up wages, prop up prices, protect failing institutions, and prevent liquidations. To accomplish these goals, he and others during his administration cartelized industries, imposed high tariffs, heavily restricted immigration, and set up governmental agencies to loan to industry. On the whole, these interventions aggravated unemployment and did not allow the government to quickly reset. This was the first presidential administration that completely abandoned free market principles during a depression; it is not a coincidence that this depression became the worst in American industry. Rothbard makes the point that the 1921 mini-depression saw more rapid declines in prices, yet the economy recovered in about a year. When government attempted to prop up the economy, it simply prolonged the depression. The Great Depression, and specifically Rothbard’s “America’s Great Depression,” are fantastic lessons in Austrian economics. Government-induced inflation and loose monetary policy resulted in a boom-bust cycle. When the bust came, rather than allow malinvestments to be liquidated, continued governmental intervention prolonged the bust period.
It is amazing how many comparables there are between the Great Depression and the Great Recession. The government’s responses to the stock market crashes were extremely similar: government got bigger and threw more taxpayer dollars at the issue rather than get out of the way and allow the economy to reset and recover. I wish I could say that we learned our lesson from these two vivid events, but we have not. Ben Bernanke is credited in many circles for getting the U.S. out of the Great Recession, but the economy is stagnant after seven years of zero percent interest rate and staggering monetary inflation. Herbert Hoover is denigrated in most circles because he stubbornly adhered to free market principles, but this is simply wrong. Hoover’s actions aggravated the depression to the point where we today call in the Great Depression. Without his interventions, it would just be another blip in the economic history of this country. I do wish that Rothbard’s book extended further into FDR’s presidency, but this is still one of my favorite books despite this. Maybe another economist from the Austrian school can pick up where Rothbard left off sometime in the future. It would definitely be a tough act to follow, though.
The 1920’s was a period of significant inflation, with an average annual growth in the money supply of approximately 8%. This was also a time of large productivity gains; prices remained fairly stable despite significant monetary inflation. Rothbard breaks down the sources of monetary inflation during this period both by type and by time (he breaks down the ‘20s into twelve separate periods to evaluate what happened and how things changed throughout the ‘20s). Stable prices gave the Fed justification to continue to pump money into the economy; they masked what was a ticking inflation bomb. Large productivity gains enabled the Fed to get away with massive inflation without much hubbub from economists or the general public. The Federal Reserve Bank of New York was also involved in inflationary schemes in concert with England to ease the gold outflow from England and easy the effects of their monetary mismanagement. Rothbard details this Bank of England-Federal Reserve Bank of New York relationship and how it shaped U.S. monetary policy. Though Coolidge largely adhered to laissez faire principles, officials during his time in office certainly did not.
The real meat of the book comes with Hoover’s reaction to the 1929 stock market crash. Rothbard does a fantastic job to document all of his interventions. He attempted to prop up wages, prop up prices, protect failing institutions, and prevent liquidations. To accomplish these goals, he and others during his administration cartelized industries, imposed high tariffs, heavily restricted immigration, and set up governmental agencies to loan to industry. On the whole, these interventions aggravated unemployment and did not allow the government to quickly reset. This was the first presidential administration that completely abandoned free market principles during a depression; it is not a coincidence that this depression became the worst in American industry. Rothbard makes the point that the 1921 mini-depression saw more rapid declines in prices, yet the economy recovered in about a year. When government attempted to prop up the economy, it simply prolonged the depression. The Great Depression, and specifically Rothbard’s “America’s Great Depression,” are fantastic lessons in Austrian economics. Government-induced inflation and loose monetary policy resulted in a boom-bust cycle. When the bust came, rather than allow malinvestments to be liquidated, continued governmental intervention prolonged the bust period.
It is amazing how many comparables there are between the Great Depression and the Great Recession. The government’s responses to the stock market crashes were extremely similar: government got bigger and threw more taxpayer dollars at the issue rather than get out of the way and allow the economy to reset and recover. I wish I could say that we learned our lesson from these two vivid events, but we have not. Ben Bernanke is credited in many circles for getting the U.S. out of the Great Recession, but the economy is stagnant after seven years of zero percent interest rate and staggering monetary inflation. Herbert Hoover is denigrated in most circles because he stubbornly adhered to free market principles, but this is simply wrong. Hoover’s actions aggravated the depression to the point where we today call in the Great Depression. Without his interventions, it would just be another blip in the economic history of this country. I do wish that Rothbard’s book extended further into FDR’s presidency, but this is still one of my favorite books despite this. Maybe another economist from the Austrian school can pick up where Rothbard left off sometime in the future. It would definitely be a tough act to follow, though.
February 12, 2019
I wouldn't say this book is majorly enjoyable to read. It's tough to be honest, but that is not the goal of a book like this. The goal of this book is to layout the postulation that the depression was not caused by lassie Faire, but rather by intervention. Rothbard beats this dead horse until no one can refute his claim. The sheer amount of figures, for which he explains how he calculates things, is enough for me to accept his claim.
Noteworthy, this book focuses almost solely on the hoover Era when the intervention got started and popularized to later be used by Roosevelt.
Noteworthy, this book focuses almost solely on the hoover Era when the intervention got started and popularized to later be used by Roosevelt.
February 2, 2009
I read a then current 5th edition copy in PDF form from the mises.org website.
A fabulous and eerily familiar read resonating strongly with the current 2008-2009 state of affairs, as it has also with previous major recessions.
Each significant crises validates and reinforces the precepts of this book. A priori proof of the validity of classical economics and the perspective of the Austrian school. It's straightforward and really, uncomplicated.
Keynesianism was borne out of the actions taken by our government to combat the Great Depression. Such stuff is shown in the book to be utterly without merit and unable to stand up to close scrutiny.
Obscuration and political expedience combine to keep the authentically discredited work of Keynes around as the go-to playbook for fighting recession.
This book will teach you about the failings of Keynes' ideas; how experiments in Keynesianism by Hoover and Roosevelt actually hurt people and extended the Great Depression, and how advocates of Keynes' ideas are either ignorant of better operating and more complete Austrian theory, indoctrinated by modern curricula which teach only Keynesianism, or (most dangerously) are simply disingenuous.
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I give it 4/5 for it's instructive primer at the beginning, detailed and interesting historical account, and carefully annotated format. I was left desperate for a continuation into the factors which finally broke the depression with the dawn of WWII. This is missing, which is unfortunate, because such would give the Austrian perspective a bonus slam dunk against other, less complete, theories. In debates with friends, it is about the endgame of the depression which is logically their first challenge to me, and mentally me to myself.
I understand how Keynesian interventions can and did prolong the suffering of the depression. But, then WWII happened and was followed by a post war mega boom that is still in place (though battered, recently). I naturally want to know why things ultimately ended up so good, if Roosevelt's actions (and Hoover's before him) were so bad.
I seek answers to the question of the depression's endgame elsewhere. Will report here on findings.
A fabulous and eerily familiar read resonating strongly with the current 2008-2009 state of affairs, as it has also with previous major recessions.
Each significant crises validates and reinforces the precepts of this book. A priori proof of the validity of classical economics and the perspective of the Austrian school. It's straightforward and really, uncomplicated.
Keynesianism was borne out of the actions taken by our government to combat the Great Depression. Such stuff is shown in the book to be utterly without merit and unable to stand up to close scrutiny.
Obscuration and political expedience combine to keep the authentically discredited work of Keynes around as the go-to playbook for fighting recession.
This book will teach you about the failings of Keynes' ideas; how experiments in Keynesianism by Hoover and Roosevelt actually hurt people and extended the Great Depression, and how advocates of Keynes' ideas are either ignorant of better operating and more complete Austrian theory, indoctrinated by modern curricula which teach only Keynesianism, or (most dangerously) are simply disingenuous.
-----
I give it 4/5 for it's instructive primer at the beginning, detailed and interesting historical account, and carefully annotated format. I was left desperate for a continuation into the factors which finally broke the depression with the dawn of WWII. This is missing, which is unfortunate, because such would give the Austrian perspective a bonus slam dunk against other, less complete, theories. In debates with friends, it is about the endgame of the depression which is logically their first challenge to me, and mentally me to myself.
I understand how Keynesian interventions can and did prolong the suffering of the depression. But, then WWII happened and was followed by a post war mega boom that is still in place (though battered, recently). I naturally want to know why things ultimately ended up so good, if Roosevelt's actions (and Hoover's before him) were so bad.
I seek answers to the question of the depression's endgame elsewhere. Will report here on findings.
October 13, 2011
Of all the Austrian School of Economics literature, America’s Great Depression by Murray Rothbard ranks among the top five most significant intellectual books. Not only is the book extraordinarily enlightening, but Rothbard mystically crafts conventional wisdom and transforms it into sensible and logical content.
The book is separated into three parts. Part one details how the depression occurred through the eyes of the Austrian Business Cycle Theory. The business cycle is a byproduct of the manipulation and failed intervention into markets by central banks and governments. The key culprit is the monetary expansion of credit through low interest rates. This creates an economic boom; however, the boom is not real economic growth; the boom is really just over-consumption and malinvestments provided by inflation, and the bust is the correcting readjustment process of markets. Part two and three explains the timeline of specific events with the subsequent crash of the stock market in 1929 through Hoover’s Administration. President Herbert Hoover was far from a lassize-faire advocate. He was one of the biggest interventionist presidents in the history of the United States. He was an incessant champion of inflationist policies, stabilization of prices and wages, and extreme protectionist concerning tariffs. Despite President Hoover using every progressive economic method of government interventionism, he left America in compete devastation with unprecedented length and concentration even though he was described as the shining white knight.
Other than Rothbard’s Man, Economy, and State with Power and Market and Mises’ Human Action, America’s Great Depression is astonishing, and it incredibly explains the disaster of government inflation in creating economic booms followed by the inevitable bust, and the depression was prolonged by government interventionist policies. Overall, the Great Depression is a significant time in United States history, and this book goes beyond the scope of what really happened compared to that of conventional wisdom.
The book is separated into three parts. Part one details how the depression occurred through the eyes of the Austrian Business Cycle Theory. The business cycle is a byproduct of the manipulation and failed intervention into markets by central banks and governments. The key culprit is the monetary expansion of credit through low interest rates. This creates an economic boom; however, the boom is not real economic growth; the boom is really just over-consumption and malinvestments provided by inflation, and the bust is the correcting readjustment process of markets. Part two and three explains the timeline of specific events with the subsequent crash of the stock market in 1929 through Hoover’s Administration. President Herbert Hoover was far from a lassize-faire advocate. He was one of the biggest interventionist presidents in the history of the United States. He was an incessant champion of inflationist policies, stabilization of prices and wages, and extreme protectionist concerning tariffs. Despite President Hoover using every progressive economic method of government interventionism, he left America in compete devastation with unprecedented length and concentration even though he was described as the shining white knight.
Other than Rothbard’s Man, Economy, and State with Power and Market and Mises’ Human Action, America’s Great Depression is astonishing, and it incredibly explains the disaster of government inflation in creating economic booms followed by the inevitable bust, and the depression was prolonged by government interventionist policies. Overall, the Great Depression is a significant time in United States history, and this book goes beyond the scope of what really happened compared to that of conventional wisdom.
June 27, 2024
Murray Rothbard's America's Great Depression is a masterful analysis of not only how the Great Depression happened, but why it lasted for as long as it did. Rothbard explains and uses the analytical tools from Austrian school of economics to identify the drivers behind the depression and its length.
In essence, the Federal Reserve kept interest rates lower than the otherwise should, leading to the excessive expansion of bank credit that was used finance capital projects. The Fed did this in part to reduce pressure England was experiencing as it used lower-than-market interest rates to recapitalize its economy. That way investors did not feel the need to move their gold from England to the United States. Eventually, however, American economic activity wasn't sufficient to cover the financing costs of its capital projects. This led to a deterioration of finances and the resulting crash on Wall Street in October 1929.
One of the most important insight from the book is Rothbard's detailed descriptions of Herbert Hoover's responses to the Great Crash. Contrary to HISTORY's depiction of Hoover as a naive free marketeer, Hoover actively sought to implement policies that we normally attach to FDR's New Deal. Hoover pressured businesses from laying off workers, introduced price supports for agricultural products, encouraged public works, and supported failing banks and businesses.
The results of these aggressive policies were the exact opposite of what Hoover was hoping for. The economy remained in poor shape rather than recover through "government stimulus."
I would strongly recommend this book to anyone who is not only interested in American history, but in the history of the early 20th century.
In essence, the Federal Reserve kept interest rates lower than the otherwise should, leading to the excessive expansion of bank credit that was used finance capital projects. The Fed did this in part to reduce pressure England was experiencing as it used lower-than-market interest rates to recapitalize its economy. That way investors did not feel the need to move their gold from England to the United States. Eventually, however, American economic activity wasn't sufficient to cover the financing costs of its capital projects. This led to a deterioration of finances and the resulting crash on Wall Street in October 1929.
One of the most important insight from the book is Rothbard's detailed descriptions of Herbert Hoover's responses to the Great Crash. Contrary to HISTORY's depiction of Hoover as a naive free marketeer, Hoover actively sought to implement policies that we normally attach to FDR's New Deal. Hoover pressured businesses from laying off workers, introduced price supports for agricultural products, encouraged public works, and supported failing banks and businesses.
The results of these aggressive policies were the exact opposite of what Hoover was hoping for. The economy remained in poor shape rather than recover through "government stimulus."
I would strongly recommend this book to anyone who is not only interested in American history, but in the history of the early 20th century.
March 7, 2016
This book has a high average rating. So I was fully expected to enjoy it. It turns out, I did not. I would guess many reviewers are proponents of the Austrian school of economics.
As for the book itself, in terms of effort, there is no denying there is a lot going into the book. For example, the book painstakingly documented things Hoover did to intervene in the economy. And a central theme is that, contrary to popular belief, Hoover's policies are not laissez-faire ones, but heavily interventionist in nature.
But in terms of real insight, I don't think the book offers much. The belief in the infallibility of the Austrian school of economics is deeply entrenched. There is no attempt to prove/convince that the theory is right. Instead, assertions are everywhere. Some arguments seem plausible, while others much less so. But the tone of the argument would have you believe that to doubt the assertion is lunacy. I'm no economist, but I'm not sure the Austrian logic about how to handle a severe recession/depression is convincing.
Finally, even the book itself admitted that the policies set out in the Hoover administration are to put humanity in front of profits. So in the event of recessions induced by wrong-headed polices I don't know what the author would have recommended as policies anyways.
As for the book itself, in terms of effort, there is no denying there is a lot going into the book. For example, the book painstakingly documented things Hoover did to intervene in the economy. And a central theme is that, contrary to popular belief, Hoover's policies are not laissez-faire ones, but heavily interventionist in nature.
But in terms of real insight, I don't think the book offers much. The belief in the infallibility of the Austrian school of economics is deeply entrenched. There is no attempt to prove/convince that the theory is right. Instead, assertions are everywhere. Some arguments seem plausible, while others much less so. But the tone of the argument would have you believe that to doubt the assertion is lunacy. I'm no economist, but I'm not sure the Austrian logic about how to handle a severe recession/depression is convincing.
Finally, even the book itself admitted that the policies set out in the Hoover administration are to put humanity in front of profits. So in the event of recessions induced by wrong-headed polices I don't know what the author would have recommended as policies anyways.
June 3, 2008
Deconstructing step-by-step the Keynesian economics that put us there, Rothbard (an unabashed student of the Austrian school) shows in meticulous detail that Government intervention lengthened, not shortened, America's period of greatest economic hardship. Faced with two equal and opposite choices -- allow the banks to fail, or allow the currency to fail -- the nascent Fed chose the former; further political strategems clouded much of the macroeconomic picture to the point where the situation appeared intractable. Conventional wisdom says World War II snapped us out of the depression; Rothbard suggests (and strongly supports the position) that allowing Market forces to come to equilibrium would have solved the problem faster. Reading it today in the age of massive bailouts of the derivatives and real estate industries should give the reader pause to ask the question: is Government intervention necessary, or even wise?
October 30, 2008
Very good book about the depression using Austrian Economic principles to diagnose what happened. Also a good book to bust the myth that Hoover was hands-off during this period. What is forgotten is that in the 1910's, 1920's, and 1930's is that a progressive form of government was prevalent in both parties. The lessons we have for now, is that too many people in both parties likewise believe in these progressive ideas. Look for a repeat of what happenned back in the 30's for what will hit us now.
For more you can check-out my blog entry that provides the conclusion from the book: TripleHash
For more you can check-out my blog entry that provides the conclusion from the book: TripleHash
October 17, 2008
This is the book at converted me to the Austrian School of Economics several years ago. For anyone who thought that the Great Depression was a failure of laissez-faire capitalism, AGD is a must-read. Besides explaining the causes of the GD, Rothbard destroys the myth that Hoover and Roosevelt were polar opposites. In fact, since The New Deal was merely a continuation of Hoover's policies, Rothbard's historical focus covers the period from 1921-1933. Much of the focus is on the Fed-created boom of the 1920s, which sewed the seeds for the disaster that followed and was perpetuated by Hoover and Roosevelt. I'm reading AGD for the second time. Recent events in the world economy give this work an extra aura of immediacy.
July 28, 2013
This is the most complete, accurate account of what really took place before, during, and after the Great Depression. This will put to rest all of the fallacies and mis-information that we all learned in school, such as WW2 got us out of the great depression and that the Federal Reserve had to exist to keep the country in tact, when in fact the exact opposite is true.
The book is not the easiest read in the world, but it has to go through a plethora of information to accurately portray the actual events that lead up to the depression, what caused it, and what made it perpetuate for as long as it did. The true story about what happened will challenge everything you have heard in school about our omnipotent government and the central banking system.
The book is not the easiest read in the world, but it has to go through a plethora of information to accurately portray the actual events that lead up to the depression, what caused it, and what made it perpetuate for as long as it did. The true story about what happened will challenge everything you have heard in school about our omnipotent government and the central banking system.
December 8, 2020
It really makes me sad that the book ends before the New Deal begins. I would have given an arm... or perhaps a pinky to read a rothbardian analysis of the New Deal, but I suppose that was done by the next generation of Austrians (Bob Murphy did it). At any rate, the book consists of two parts, theory and history. The part on theory sets forth the austrian business cycle theory and dismantles just about every criticism ever raised. It's about a hundred pages and it's mandatory reading for anyone who wants to understand the cause of economic depressions. I didn't care much about the history part but Rothbard demonstrates though hundreds of pages why Hoover's administration was anything but laissez faire.
July 14, 2013
This book relates the history of the Great Depression that you weren't taught in public school. I am amazed how politicians are trusted like angels to do the right thing. This book is so revealing about both republican and democrat presidents and how both parties protect their own self interests rather than the public's. I will never see President Hoover in the same light again. He may have been a smart man and a great engineer but it's hard to engineer an entire national economy. There is no substitute for Individual self reliance, adherence to liberty and freedom, and healthy skepticism for government 'solutions' to our problems.
June 20, 2014
This book is very misleading in title and cover. Admittedly, I wanted some disaster porn: Hoovervilles, bread lines, and Wall Street fat cats jumping from windows. Now, I feel like I was sold a Hustler to find it was just a cover glued onto a copy of The Economist. The actual Great Depression is a side bar to this screed on Hoover-Roosevelt (government actions can be variously socialist and fascist) and fractional banking. Like a wild-eyed radical this work, which never should have been an audiobook given all the tables, extols the Austrian School of economics as dogma and yearns nostalgically for the gold standard.
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