We’re told that the Federal Reserve was created as a solution to the chronic bank panic problem of the nineteenth century. Bank loans to farmers and businesses were issued on top of a fractionally reserved base of gold and silver, which meant that any business slump or bad harvest resulted in a cascade of defaults, depositor panic, and bank failures.
We’re told that the problem was that the currency was too “inelastic.” If only the money supply could expand and contract with “the needs of trade,” then it would be smooth sailing for financial markets and the macroeconomy.
Thankfully Congress and President Woodrow Wilson took courageous action to stabilize the banking system and provide a national currency that could expand as needed to stave off panics and slumps. And, as everyone knows, since the Federal Reserve Act of 1913, the US economy has been on an even keel, with no more financial panics, business cycles, or economic depressions.
Murray Rothbard smashes this myth in The Origins of the Federal Reserve. Throughout July, the Mises Institute will give away copies of this important book to anyone and everyone.
Rothbard places the creation of the Fed squarely in its Progressive Era context. The Progressive Era is usually portrayed as a time when popular revolts against big business resulted in regulations that protected consumers and workers. But the truth is that in this era big businesses cozied up to politicians and bureaucrats. They promoted and crafted regulations for their own industries to protect themselves from market competition and market discipline.
The banking industry was no exception. Rothbard shows that the Fed did not spring forth from democracy like Athena from the head of Zeus. Instead, Morgan, Rockefeller, and Kuhn-Loeb interests teamed up to lobby for and write legislation that would turn banks into central coordinators of credit expansion.
The result was a government-sponsored banking cartel. The chronic bank panic problem was “solved” with chronic inflation and a lender of last resort that protected banks from market discipline. Instead of sound money immune to political manipulation, we got centralized note issue. Instead of sustainable economic growth, the 20th century featured depressions, recessions, financial crises, stagflation, and inflation-financed world wars.
As Rothbard explains, the financial elites behind the Fed understood that they needed public support. So they launched a major propaganda effort through bankers, business associations, academics, and publishers. Ending the Fed and returning to sound money requires unravelling the myths surrounding the Fed and its origins.
That’s why we want to put The Origins of the Federal Reserve in front of as many people as possible.
July 31 is the deadline to get your free copy of The Origins of the Federal Reserve—up to 5 copies per order, 1 order per person—to share with friends and family. And be on the lookout for our next Rothbard giveaway book on August 1.
For domestic customers who wish to order more than 5 copies, click here to order your free copies and only pay shipping fees.
