Right Wing Reading Rainbow II: The Mystery of Banking
White gold pants, jet ski made of Yuan. Foie gras bust of Albert Einstein.
More people than you realize are Austrian economists, if not explicitly, then implicitly. Even people who have “moved on” from libertarianism into some new edgy boutique philosophy still carry its baseline assumptions. The libertarian to alt-right pipeline was very real.1
Much in the same way that it’s hard, if not impossible, to go from being any kind of right wing extremist to a normie Republican, it’s very hard, if not impossible, to go from being an Austrian back to a Keynesian or a Monetarist. When I see people fully put down Austrian priors, they go into two directions. They either become full-on MMT economic nihilists, or else they get into the German Historical School.
So whether you like it or not, whether you’re a libertarian or not, if you want to be able to discuss economic questions in right wing circles, you’re going to have to understand some basics of price theory, and what on earth we’re going on about when we talk about the Federal Reserve.
I’ve seen a lot of people, been in a lot of discussions with people, who I find perfectly agreeable, with good politics, but who unfortunately revealed themselves to be completely out of their depth when it comes to this sort of thing. Bidenomics/COVIDflation. Central Bank Digital Currencies. Crypto vs Fiat. The Weimar Republic and What Came After. The Red Shields and the Napoleonic War. Libya, Saudia Arabia, Iraq, and the Petrodollar. Their hearts were absolutely in the right place but they fundamentally didn’t understand what was going on behind the curtain there.
The Book
The easiest way for anybody to get into Austrian Economics, Murray Rothbard, and the Free Banking movement would be to start with The Mystery of Banking. This book is not primarily a history book, but an economics book. The first third of the book explains the origins and basic mechanics of money and prices. The middle portion of the book explains the mechanics of bank deposits and lending.
The final portion of the book is a history of Central Banking in Great Britain and the United States, showing how various experiments in cartelized banking schemes were, if not causal, then certainly prologue to:
The Panic of 1819 and the election of Andrew Jackson
The reliance of the Antebellum South on foreign credit
The end of Reconstruction
The Great Depression (of course)
The loss of British economic prestige in tandem with the loss of their military dominance.
We are also introduced to what might be called the Rothbardian Method of History, which is primarily about naming names and pointing fingers. William Paterson literally founded the Bank of England and was a major lobbyist for the 1707 Act of Union between Scotland and England, yet he makes no appearances in the history books. Likewise, Robert Morris Jr. was practically the primary financier of the American Revolution. His business partner, Thomas Willing, was appointed by Alexander Hamilton as the President of the First Bank of the United States. I didn’t see any scenes about that in the musical. Rothbard also tells a very interesting story about the connection between Jay Cooke, US Senator (and later Treasury Secretary) Salmon P. Chase, and US Senator John Sherman (better known for the Antitrust Act). It has to do with Civil War Bonds, the National Banking Act of 1863, and Federal subsidies to the Northern Pacific Railroad Company.
In current editions of the book, Rothbard also includes an epilogue where he reveals how, in the years since the first printing, he had actually come around to an opposite viewpoint to what he originally published on the question of whether or not one should, or even can, have Fractional Reserve Banking on the free market.
Follow Up Readings
More Austro-Libertarian introductions.
How to Think About The Economy, by Per Bylund. This is effectively the Ludwig von Mises Institute’s official primer on Austrian economics. Once you’ve read it, you will be fully capable of stepping forward to any other book in the Institute’s tremendous library. The only reason I’m not making this book the prime recommendation in this section is because it is not a history book, and the Rothbardian Method of History is too important to leave optional.
Cronyism, by Patrick Newman. A masterwork of “Rothbardian History,” Patrick Newman shows us that there is nothing new under the sun by laying out practically every shady deal, corrupt bargain, and not-so total coincidence that characterized American politics up to the end of the Mexican War. You really come to understand why Andrew Jackson hated these people, if it wasn’t clear enough by the end of Mystery of Banking.
A History of Central Banking and the Enslavement of Mankind, by Stephen Goodson. It is a revisionist history of the Roman Empire, the Bank of England, the Napoleonic wars, and the 20th century, focusing on the peculiar role of large banking institutions. I myself cannot say that I have ever read the book, nor can I say that I recommend it, as the author has views so heinous I cannot even elaborate on them here. But word on the street is that the book is extremely interesting, well-researched, and eye opening.
Further, some non-Austrian, and to some extent anti-Market books that you may find interesting.
The National System of Political Economy, by Friedrich List. List was an advocate, indeed he was the advocate, for trade protectionism. There is no better place to begin to understand the arguments for it. Further, Austrians will find themselves in unusual agreement with his theory, if not his practice. People don’t realize this, since Ludwig von Mises tells the story a bit differently, but the Austrian School was actually born out of the German Historical School of Economics. Friedrich List’s book is a broadside attack on Adam Smith and the mathematization of economics that would later lead to Keynesianism and Marxism. Mises learned from Bohm-Bawerk. Bohm Bawerk learned from Knies, Roscher, and Hildrebrand. Knies, Roscher, and Hildrebrand read List.
Capitalist Realism, by Mark Fisher. “It is easier to imagine an end to the world, than an end to Capitalism. There is no alternative.” Western “anti-capitalism,” in the form of social democracy, is just capitalist. Even China, a global power run by a “Communist Party,” is capitalist. “Anti-capitalist” media is more often than not just “anti-consumerist.” There can be evil corporations, more often irresponsible, but it is simply assumed that corporations are like politicians, such that they act according to their nature, and the burden is on the public to “keep an eye on them” and that if a corporation goes too far, the fault lies partly with us.
End of the Line, by Barry Lynn. In 2006, Barry Lynn felt that a global economy built on “just-in-time” production and delivery stretched across dozens of nations with varying degrees of political stability might be vulnerable to shocks. Fourteen years after the release of the book, he was proven correct.
And Something Fun
The Probability Broach, by L. Neil Smith. A fun bit of libertarian alt-history where Albert Gallatin convinced the US Regular Army to mutiny against George Washington during the Whiskey Rebellion. The Constitution was abolished and the Articles of Confederation were reimposed with even more vigorous limits on federal power. Chicago is the capital of the North American Confederacy, while New York, Washington DC, and Denver don’t exist at all. Lincoln was an obscure lawyer who shot beloved actor John Wilkes Booth. The entire trajectory of the West’s ideological development is so slanted in a libertarian direction that “Franklinites” are still, in the late 20th century, lobbying to convene a permanent legislature that meets more than once every couple of years. A police officer from our world is launched into this one, and discovers a Freemasonic “Hamiltonian” plot to subvert the Confederacy and take over the world. Interestingly, this book was released fourteen years before the movie Demolition Man, but the plots are so nearly identical that I wonder if the screenwriters had read the book and just made a few tweaks to its politics.
This is the second in a series of eight articles on right-wing book recommendations.
The next article will look at the Great Civil War of the West.
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I remember a very humourous exchange in early COVID when a group of, let’s call them third-positionists, were saying that if the state was going to be wielding power to shut down businesses and make people wear masks, it may as well exercise power to print money to pay working people to stay home. Other people were in the replies, warning that this would be bad because it would cause credit expansion and so on. And the OP, exasperated, tweeted: “Why are a bunch of national socialists right now complaining to me about Austrian Business Cycle Theory?! You guys are just a bunch of racist liberals!”