America's Great Depression

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Ludwig von Mises Institute, 1972 - Business cycles - 361 pages
6 Reviews

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 book remains canonical today because the debate is still very alive.  

This book applies Austrian business cycle theory to understanding the onset of the 1929 Great Depression. Rothbard first summarizes the Austrian theory and offers a criticism of competing theories, including the views of Keynes.

Rothbard then considers Federal Reserve policy in the 1920s, showing its inflationary character. The influence of Benjamin Strong, the Governor of the New York Federal Reserve Bank, was especially important. In part, his expansionary policy was motivated by his desire to help Britain sustain the pound. Strong was close friends with Montagu Norman, the Governor of the Bank of England.

After the 1929 crash, Herbert Hoover followed an interventionist policy that prefigured the New Deal. He favored keeping wage rates high and thus contributed to rising unemployment. Against the popular stereotype, Rothbard shows that Hoover was not a partisan of laissez-faire.


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User Review  - AlanEJohnson - LibraryThing

I 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 ... Read full review

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Page 181 - Two courses were open. We might have done nothing. That would have been utter ruin. Instead, we met the situation with proposals to private business and the Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic.
Page 66 - Relation Between Capital Goods and Finished Products in the Business Cycle," in Economic Essays in Honor of Wesley Clair Mitchell (New York: Columbia University Press...
Page 181 - Some of the reactionary economists urged that we should allow the liquidation to take its course until we had found bottom. Some people talked of vast issues of paper money. Some talked of suspending payments of government issues. Some talked of setting up a council of national defense. Some talked foolishly of dictatorship — any of which would have produced panic itself.
Page 117 - The primary purpose of the Federal Reserve Act was to so alter and strengthen our banking system that the enlarged credit resources demanded by the needs of business and agricultural enterprise will come almost automatically into existence, and at rates of interest low enough to stimulate, protect, and prosper all kinds of legitimate business, and to bring about ultimately a greater equality of interest rates throughout the coutry.
Page 199 - The very essence of great production is high wages and low prices, because it depends upon a widening range of consumption only to be obtained from the purchasing power of high real wages and increasing standards of living. Today the majority of employers in time of desperation exhaust every device to make ends meet before resorting to wage reduction.
Page 241 - it is not true that high wages make prosperity. Instead, prosperity makes high wages. When wages are kept higher than the market situation justifies, employment and the buying power of labor fall off.
Page 181 - For the first time in the history of depression, dividends, profits, and the cost of living, have been reduced before wages have suffered. . . . They were maintained until the cost of living had decreased and the profits had practically vanished.
Page 206 - The President's conference has given industrial leaders a new sense of their responsibilities. . . . Never before have they been called upon to act together ... in earlier recessions they have acted individually to protect their own interests and . . . have intensified depression.
Page 204 - liquidation" of labor had been the industrial policy of previous depressions ; that his every instinct was opposed to both the term and the policy, for labor was not a commodity. It represented human homes. Moreover, from an economic viewpoint such action would deepen the depression by suddenly reducing purchasing power and, as a still worse consequence, it would bring about industrial strife, bitterness, disorder, and fear. He put forward his own view that, in our modern economy and on account of...
Page 260 - MAY 5, 1931. In this country there has been a concerted and determined effort on the part of both government and business not only to prevent any reduction in wages but to keep the maximum number of men employed, and thereby to increase consumption.

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