A few weeks ago, eagle-eyed readers of the Cobden Centre will have spotted that the doyen of the UK Hedge Fund industry, Hugh Hendry of Eclectica Asset Management, was reading Jesús Huerta de Soto’s epic magnum opus, Money, Bank Credit, and Economic Cycles, a mighty publication deeply embedded within the firmament of the Austrian School.
If you want to check out Hugh Hendry’s reading preferences for yourself, UK residents can watch the BBC Newsnight piece entitled A Day in the Life of a Financial Speculator. At five minutes and forty seconds, you’ll see a brief clip of the book in question.
The clear lesson of the Newsnight report is that if you want to possess the economic understanding of a leading Hedge Fund operator, then you need to read this magnificent book. However, this recommendation comes with a caveat; because Money, Bank Credit, and Economic Cycles is a very Big book. It needs to be, because it covers in fluid detail the precise history of the entire financial system of the western world for the last two thousand years, from Roman contract law all the way through to the present day. Although it is as small as it can possibly be, it is therefore a necessarily large work requiring a firm commitment from its readers before they begin their mighty voyages through its enlightening pages.
This then is the bible of economic understanding towards which we are headed. Braver souls may feel like leaping straight into the task, and good luck to you if you do. However, before we attempt this daunting pinnacle, some of us may need to establish a lower base camp and a series of lesser targets, to help us on our way towards the summit. I have therefore mapped out a possible route for you. This route map is designed for those who perceive that the current global financial world is a series of disasters waiting to happen and for those who sense that the last 40 years of economic development in the western world has been a crumbling papier-mâché edifice built upon a soft foundation of fiat currency sand.
Having prepared yourself for this task with either Economics in One Lesson or Economics for Real People, as a basic training programme in ropes and crampons, this superb ladder of books can take us straight into Money, Bank Credit, and Economic Cycles, and from there into a world in which it all starts making sense:
- What Has The Government Done To Our Money (Rothbard)
- The Mystery of Banking (Rothbard)
- Early Speculative Bubbles (French)
- Meltdown (Woods)
- Money, Bank Credit, and Economic Cycles (de Soto)
We begin first with Murray N. Rothbard’s What Has The Government Done To Our Money?.
In the classic David Gordon joke, the world’s shortest book is perhaps Your Duties to Other People, by Ayn Rand. Murray Rothbard’s classic on money is slightly longer than that, but it is still a very quick read.
Broken down into three main sections, What Has The Government Done To Our Money? is a breathless Blitzkrieg of the story of money, from its inception in the free market as a precious metal medium of exchange, right through to its usurpation and debasement by government and its eventual replacement by paper fiat currency, endlessly printed by the world’s central banks to give us all of the malinvestment distortions of the present age, along with all of their associated bursting financial bubbles:
- Money in a Free Society
- Government Meddling With Money
- The Monetary Breakdown of the West
As the hardest of hard-money men, Rothbard is unrelenting and unequivocal in his criticism of those who took us from a solid money system based upon gold or silver, towards a fractional reserve system based upon paper, though he is forensic in his analysis of how they did it, taking centuries in the process to accomplish this unfeasible goal. However, he tells the story with a twinkle in his eye and his scalpel-like prose flows like a hand through silken water.
Unfortunately, Rothbard died in 1995, but he would have loved to have been around today to tackle head-on all of the Keynesians who are currently blighting our economic futures. Alas, all of the distortions he describes and predicts in his book are visible all around us today, with zero percent central bank lending, massive government borrowing, and incipient and possibly rampant stagflation waiting to gobble us up around the corner, if hyper-depression and hyper-inflation fail to get us first.
Freely available at the Mises Institute, to share the beginnings of Rothbard’s understanding this slim introductory book on the story of money is a sure-footed stepping stone for all aspiring students of Austrian Economics.