Classics of Conservatism - Part XXIV - America's Great Depression

This month's Classic of Conservatism is Murray Rothbard's 1963 work, "America's Great Depression."



25 years have elapsed since I read this book, but I will never forget its main lesson (and that of the other Austrian economics books I read at that time). The Depression of the 1930's was caused by the alternating periods of expansion and contraction of the money supply by the Federal Reserve Board. The Federal Reserve, under the leadership of Benjamin Strong (Governor of the Federal Reserve Bank of New York) began a long credit expansion in 1922. This expansion continued until the summer of 1929, when the FED reversed course and began contracting the money supply. Several months later, the stock market crashed. The stock market crash is typically considered the beginning of the Great Depression. In fact the Depression had its roots at the beginning the 1920's. (I am somewhat fuzzy on the dates due to the time elapsed since I read the book.)

MSM/DNC mythmakers usually assign the crash of October 1929 as the beginning and attempt to address stock trading practices as the cause. They have convinced generations of students that the activities of a few stock traders somehow caused the collapse of the entire economy. The "historians" ignore the role of centralized credit expansion on the entire economy over a period of years. The term "fractional reserve banking" never appears in print in today's "newspapers."

Instead of focusing on the period from 1922 through 1929, the establishment mouthpieces have caused the average reader to focus on the activities of a few stock brokers at the very end of the great credit expansion. Even conservatives who try to explain the issue in terms of FED policy blame the FED for contracting in the summer of 1929 instead of blaming the FED for creating the bubble over the course of a decade.

If fractional reserve banking did not exist, the economy would not grow nearly as fast as it has during the various bubbles of the 20th (and 21st) century, but the inevitable collapses would not have occurred either. Growth would be slow, steady and safe. We need not fear the crises that have plagued our economy on a regular basis since 1913 (and the inevitable and predictable crisis that now threatens to destroy the economy completely).

Rothbard is one of the few writers to explain the Depression in terms of the 1920's credit expansion instead of the non-issues that the most writers and teachers focus on. In Rothbard's book, you will not read first hand accounts of bread lines and soup kitchens. Nor will you see a rehash of such events as the "bonus army" or the creation of the WPA. These events were the results of the policies that created the Depression. Most writers focus only on these results and teach nothing about the causes.

Rothbard explains the business cycle theory and its application to the credit expansion of the 1920's.

We all acknowledge that today's crisis results from bankers making bad loans to unqualified individuals. But very few have bothered to ask why so many lenders made these mistakes at the same time. This is the question that Rothbard asks in America's Great Depression. Like anyone else, businessmen will make mistakes (and usually pay the consequences). But the business cycle over the past century features all businesses making the same mistakes at the same time. Whether these mistakes include risky lending, overproduction, investment in unprofitable lines, overspending, etc., the mistakes are coordinated throughout the economy and are not limited to one region or one city or one sector. Rothbard shows that this phenomenon occurred even in the 1920's - well before today's "global economy" existed. The one factor that tied all of these errors together was Federal Reserve policy. And Federal Reserve policy has served this function in every recessionary cycle since the FED was created in 1913.

If you are not sure of the extent of misinformation that relates to the Depression, ask a friend if he knows when the Federal Reserve Board was created. Far too many people will say that the FED was created by FDR as one of his many reforms following the stock market crash. Only when one realizes that the FED existed 16 years before the stock market crash will one see an example of how common beliefs about the Depression and economic conditions have become so muddled.

Rothbard provides detail and documentation to demonstrate where the blame truly belongs. After reading America's Great Depression, you will realize that today's crisis was inevitable decades ago and that modern policies and "solutions" will only make the problem worse.

For further reading on the business cycle and the role of a central bank, see Ludwig von Mises' "Theory of Money and Credit." For more history of the Depression and how it related to credit policies following the creation of the FED, see Garet Garrett's "Bubble that Broke the World."

Classics of Conservatism - Part XXIII - The Secret of the League

Click here for previous Classics of Conservatism.

This month's classic is The Secret of the League, by Earnest Bramah. Secret celebrated its 100 year anniversary in 2007.

1907 (1995 edition)








Secret of the League is one of three old novels that I refer to as "Ayn Rand relics." Together with The Driver (1922) and Calumet K (1904), Secret provides clues as to the origins of Ayn Rand's later novels.


Secret of the League takes place between 1915 and 1918. Being written in 1907, the book has nothing to do with World War I. Instead, Bramah writes of the takeover of the English parliament by socialists, who immediately pass extreme socialist legislation.

(click to enlarge)















Secret dramatizes the creative solution adopted by Salt, the main character, and his friends. The solution is unique and is not beyond the reach of ordinary individuals.

I first read this book in 2004 just before I began blogging (the main character's name and the year of publication inspired my screen name). I describe Secret here because it begins to appear that we may need some unique alternative (and I don't mean a third party candidate) as a result of this year's election. The candidates for President in 2008 appear poised to expand the already unsustainable entitlement programs, increase taxes and choose judges that have no inclination to recognize the government's true constitutional limitations. Our thinking will have to be creative as we face a long era of darkness at the hands of an increasingly socialist government.



The book is far more than a "how to" manual. Secret provides a humorous look at socialist government, pandering politicians, union political pressure and other such plagues. We read with amusement as leftist government officials find themselves helpless as their spending programs leave their government destitute and powerless.

Regardless of whether we implement Salt's ideas, the fate of the government in Secret may well be the fate of our own government. Our own government may collapse under the weight of unsustainable entitlement programs. The only question is "when?" In Secret of the League, Salt and his allies merely found a way to make sure that a large faction of the country was ready to pick up the pieces when the collapse arrived and to remove from office those who were responsible for the debacle. If we do nothing, we will be helpless when social security, medicare, (reparations ??) et cetera drive government and the financial markets to ruin.

I do not reveal specifics of Salt's actions so as not to spoil the plot. For those that have read Atlas Shrugged, Salt took a different course than Galt. Salt's plan required less technology, less cooperation from powerful individuals and less disruption of the lives of his allies. But Salt's plan clearly foreshadowed Ayn Rand's theme in Atlas. Ayn Rand made the plot better and more comprehensive, added her own ideas and provided more thorough philosophical justification for the actions of the heroes [although Bramah provides a fair amount of philosophical justification as well]. There is no dialogue or language from Secret that was repeated in Atlas. Salt's plot in Secret is enjoyable in its own right and also because the reader will recognize the seed of Ayn Rand's story from a half century later.

The few technological aspects of the book provide for additional enjoyment, as the reader will recognize a crude precursor to modern day faxes and e-mails. Bramah also anticipates the ease and availability of modern air travel, but in a different form. Air travel was in its infancy when Bramah wrote Secret of the League.

If nothing else, Secret of the League will help the reader understand that socialism is not inevitable, invincible or irreversible. The book will further reinforce other writers that have opposed socialism and modern politicians that warn of the conseqences for ourselves if we allow the government to continue on its present course.

Classics of Conservatism - Part XXII - Phyllis Schlafly - A Choice Not an Echo

Previous classics of conservatism.


1964




One disadvantage from which conservatives have suffered for many years has been the need to re-learn recent history over and over again. This problem exists because young conservatives have no way of learning about the past due to the liberal bias of modern education. Modern schools teach that conservatism has no history or core philosophy other than a legacy of racism, oppression and war. Students have no idea that there is a philosophical basis and historical context for such ideas as free markets, lower taxes, national sovereignty, etc.

Students and recent graduates, if they are interested in politics at all, will tend to think only in terms of the headline-of-the-moment instead of the broader context into which an election fits. Younger voters think they are discussing "the issues" if they debate how much government interference in health care is best, how to address "global warming," or what to do about high gas prices.

At the same time, younger conservatives who cannot remember the 70's, 80's or 90's are susceptible to many ideas that would be contradicted by a little memory of recent history. One such idea is that "moderate" Republicans are somehow more electable than conservative Republicans. We are supposed to believe that "independents" will spring out of the woodwork to support a moderate Republican instead of the Democrats' liberal nominee. And this is where we must reinvent the wheel. If new conservatives could remember Gerald Ford, Bob Dole, George Bush I, Ronald Reagan, etc., they would not fall prey to this kind of propaganda. Prior to the new media, there was no way for conservatives to educate each other or pass on the lessons of the recent past. We had to rely on a conservative newspaper columnist whose column appeared once a week or an old book or some other rare source of conservatism to provide an irregular trickle of information that wasn't filtered through the MSM/DNC.

Today, we can transmit facts, history and perspective much more quickly through the new media, especially if such facts include some of the old material that the MSM/DNC used to be able to suppress.

One such treasure trove of facts is found in Phyllis Schlafly's 1964 paperback, "A Choice Not an Echo." In Choice, Schlafly breaks down each Republican primary battle from 1936 through 1960 and shows how establishment Republicans (those with ties to the publishing and banking world) had undermined the choice of the rank-and-file Republicans with false charges (spread through an obliging MSM) of "extremism" and "unelectability."

Among my favorite chapters is Chapter 6, in which she discusses polls - "Pollsters and Hoaxsters" (1944):

The New York Kingmakers realized they could not capture the 1944 Republican nomination either with Wilkie or with the same type of last-minute blitz they had used in 1940. This time they went into action earlier. They discovered and developed a new political weapon: the Gallup Poll. Dr. George Gallup began asking a lot of questions of a very few people, and - funny thing - he usually came up with answers that pleased the New York kingmakers.
The Gallup Poll has been used repeatedly as a subtle propaganda machine to sell the Republicans on the false propositions that the GOP cannot win unless it (1) continues the New Deal foreign policy (Soviet appeasement - Salt) and (2) names candidates who will appeal to the left-leaning Democrats and liberals.

p. 45

A Choice Not an Echo sold millions of copies and was instrumental in wresting control of the GOP back to the grassroots. Even though Barry Goldwater lost by a wide margin that year, the Goldwater coalition was born that year that eventually swept Ronald Reagan into office. As a result of the grassroots organizing efforts and the distribution of various short books such as Choice in 1964, a movement was born. Richard Nixon, despite his faults, was elected in the next two elections by the same coalition. Niether Nixon nor Reagan won by appealing to moderates. [Nixon didn't sell out conservatives until after he was elected.]

Schlafly identifies the people she refers to as "kingmakers." They have a lot in common with the Republican "moderate" kingmakers of today.

In 2002, Ann Coulter wrote about Phyllis Schlafly and Choice:

About the time a young Hillary Rodham was serving as inspiration for the perfect little girl in the Hollywood thriller "The Bad Seed," Schlafly was remaking the Republican Party.

In 1964, Schlafly wrote "A Choice, Not An Echo," widely credited with winning Barry Goldwater the Republican nomination for president. The book sold an astounding 3 million copies. (The average nonfiction book sells 5,000 copies.) Goldwater lost badly in the general election, but the Republican Party would never be the same.

Goldwater's nomination began the retreat of sellout, Northeastern Rockefeller Republicans who hoped to wreck the country with slightly less alacrity than the Democrats. Without Schlafly, without that book, it is very possible that Ronald Reagan would never have been elected president.

For the record, I read my copy of A Choice Not an Echo years before I had heard of Ann Coulter, but many years after the book was published. Original editions of the book were still floating around in the 1980's just as they are today. I promote the book now because it is an election year and Republicans face a choice regarding who to nominate. The cries of "electability" ring throughout the land, as we are told to support John McCain by the MSM/DNC.

Moderates bring the GOP to defeat. The Independents or "undecided" voters are nothing but liberals who are too embarrassed by the Clintons, Jimmy Carter, Al Gore et al. to call themselves Democrats. Such voters did not abandon the Democrats to elect Gerald Ford or Bob Dole and they will not help John McCain in 2008. Instead, they will give us Barack Obama, especially if we provide nothing more than an echo.



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update - January 30, 2007 - See Michelle Malkin today for a preview of how this fall's election will turn out like so many of those discussed in A Choice Not An Echo.

Classics of Conservatism - part XXI - Atlas Shrugged - Ayn Rand

Click here for a previous "Classic of Conservatism."

According to the New York Times, today is the 50th anniversary of the publication of Atlas Shrugged.

Written by Ayn Rand, the novel explores the philosophies of objectivism and liberty. It has been twenty years since I read my copy, but I remember what attracted me to it. Rand did not defend capitalism on the same grounds as modern day conservatives. She did not claim that capitalism was better for the poor or less evil than its critics claimed or acceptable only if properly regulated. Instead, Rand advocated man's happiness and success as values and virtues in and of themselves. Rand was among the first to say that profit is a virtue, while altruism is harmful and wrong. She correctly identified the totalitarian movements of the 20th century, at home and abroad, with the altruistic side of the philosophical ledger. Altruism is the philosophy that one's life is at the disposal and service of others. She draws the logical conclusion between altruism, theft and slavery.

The attack on altruism may shock and offend the average reader at first, but it stands to reason that there must be more to the story about this word [altruism] that we have taken for granted for so long and have repeated without comprehension so many times. Those who want to think will enjoy Rand's books, including Atlas Shrugged, for this reason alone.








Atlas Shrugged is the climax of the Randian novels. In previous years, she had written several novels, plays, short stories, etc. Atlas Shrugged was her masterpiece. The book contains the story of a railroad executive who struggles against the philosophy of not only altruism, but government enforced altruism. But the plot is about more than politics or business. The plot is also a great mystery story, as the reader gradually learns who is responsible for turning out the lights of world.

Paperback (Signet) edition from the 1980's





The story is broad in scope, as it takes the reader from one end of the country to other over the course of three years (with numerous flashbacks to the previous decade and beyond).

Ayn Rand always believed that "plot" was the most important element in any story. The plot of Atlas Shrugged was relatively complex and undoubtedly took much editing [and many years] to make it complete, consistent and integrated. The basic story involved a conflict between the main characters, all of whom are the "good guys." This theme of "good vs. good" was a recurring feature of Randian fiction, as she believed that evil was impotent to do harm in this world unless aided by the good. So she focused on the good and the way that good unknowingly helps evil. Another benefit of this plot style is that the end is much less predictable.

The basic story in this novel can be traced back through numerous novels of Ayn Rand, all the way to a short story named "Red Pawn" in the early 1930's. In the previous works, the plot may be almost unrecognizable as a precursor to Atlas Shrugged, but the similarity exists once the reader understands the "good vs. good" technique and how to match the characters in the early works with those in Atlas Shrugged.







The Times article focuses on the long term influence of Atlas Shrugged:

One of the most influential business books ever written is a 1,200-page novel published 50 years ago, on Oct. 12, 1957. It is still drawing readers; it ranks 388th on Amazon.com’s best-seller list.

. . . . .

But the book attracted a coterie of fans, some of them top corporate executives, who dared not speak of its impact except in private. When they read the book, often as college students, they now say, it gave form and substance to their inchoate thoughts, showing there is no conflict between private ambition and public benefit.

“I know from talking to a lot of Fortune 500 C.E.O.’s that ‘Atlas Shrugged’ has had a significant effect on their business decisions, even if they don’t agree with all of Ayn Rand’s ideas,” said John A. Allison, the chief executive of BB&T, one of the largest banks in the United States.

“It offers something other books don’t: the principles that apply to business and to life in general. I would call it complete,” he said.

The following that the book has attracted is often watered down with such references as "public benefit" etc.

I have often lamented that Rand did not write more books. But my reading has lead me to an author whose writings in the 1920's often foreshadowed the Randian works in haunting ways. Garet Garrett's novels have sufficient similarity with some of the storylines in Atlas Shrugged to make those novels almost equally enjoyable. Rand not only has left a great impression on future generations, but enjoys deep roots in prior literature.



Previous - Philosophy: Who Needs It

Classics of Conservatism - Part XX - Boomsday

Click here for a previous Classic of Conservatism.

We have been told for generations that social security is insolvent or will soon be insolvent and/or will run out of money someday. We have watched as one Republican president after another has proposed some solution, only to see that solution quickly shot down in a hail of demagoguery. We watch every election cycle as the MSM/DNC tries to frighten seniors into believing that the Republican candidate has a secret plan to cut/deny SS benefits. The social security system started as an illegal ponzi scheme. The political process has turned the system into a parody of itself.

Most of us have known these things for years (unless you trust the government to take care of you in your old age). But now we have something else to keep the social security issue in perspective - a new novel and a new word. "Boomsday" is the name of both the novel and a deadline. Boomsday is the day when baby boomers begin retiring with full benefits to be paid by the next generation. While it is not clear that the disaster will begin immediately upon the retirement of the first boomers, it IS clear (from the novel and from our own knowledge of economics and common sense) that the fuse will be lit on that day and will quickly burn to its inevitable conclusion.

more than just a novel








Boomsday the novel is set against the backdrop of the financial consequences for the United States government and the economy. The novel describes the actions of one principled person with a catchy name who fights back using her even more appropriately named blog.



The reader is treated to stories of riots on golf courses in protest against the boomers' easy retirement lifestyle at the expense of later generations. The reader is further presented with the main character's unique and imaginitive proposals for rescue of the SS system. We share her dismay as her main proposal is compromised away, despite retaining the same name and form.

"Boomsday" is not simply a dry novel filled with statistics and grim warnings. The book is filled with wit and humor and even some fast paced action. As the characters race toward the climax, the reader detects a hint of a John Grisham story.

Boomsday is about more than simply the collapse of social security. Boomsday is about Presidential and legislative politics. The politics and the humor take the story a little far afield of its original mission. The author's antipathy to the "Christian Right" is also misleading and distracting. The book is filled with salty language, probably in an attempt to attract younger readers to find out about their impending fate.

The book is to be celebrated for reminding us of the war in Bosnia, which still occupies American forces and serves as a symbol for so much of what is wrong with our government and its policies.

















[The above images do not actually appear in the book (there are no illustrations), but they demonstrate some of the major plot points that guide the story.]


But the most important function of the book is to jump start the discussion of the disaster that awaits us when SS can no longer survive in its current form. The book, much like the main character, seems to want only to begin a "dialogue", during which presumably more Americans will realize the grave danger with which we are faced. The book fulfills that role.

Coining a term that will serve to remind the audience of the impending SS crisis is crucial. With the use of the term "Boomsday", we now have a word that will shorthand the concept and aid our discussion. For too long, the MSM/DNC monopoly not only provided misinformation on key issues, it also prevented any discussion of key issues by refusing to discuss or even identify key ideas or problems. The imminent collapse of SS is one of those concepts. The one word identifier - "Boomsday" - now allows us to warn of the impending Boomsday just as the word "9-11" allows us to warn of future terrorism in our cities.

I recommend the book, but, more importantly, I recommend the word.

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update - I have updated the photos above.