Merrill's David Rosenberg discovers Rothbard
In his November 17, 2008, ML report, David Rosenberg writes:
"With this in mind, we were fortunate to have a client mail us a book titled America's Great Depression by Murray N. Rothbard. We think it is an absolute must-read, on the scale of Amity Shlaes' The Forgotten Man. In this book, you will learn that the New Deal machinery was established by Herbert Hoover, not FDR, and that the scale of the government incursion into the economy was so farreaching that the multi-year program actually ended up doing more harm than good. What is amazing is the chapter on the Reconstruction Finance Corporation (RFC), which was like the TARP in its efforts to bolster government equity stakes in banks, and therefore, to perpetuate the excess capacity in the system. The RFC provided money to groups from financials to farmers (cotton loans were big) to railroads ("some $264 million were loaned to railroads during the five months of secrecy") to state governments. Sound familiar?
This RFC began with government capital of $500mn in 1932. Eventually, that grew nearly eight-fold, which is why we think the current TARP is really TARP1. You read this book and you get a glimpse of Hoover's "war on the stock market, particularly on short-sellers" and the new Federal bankruptcy law of 1932, which served to "weaken the property rights of creditors ... states also joined in the attack on creditors" ... as in most depressions, the property rights of creditors in debts and claims were subjected to frequent attack, in favor of debtors who wished to refuse payment of their obligations with impunity ... many states adopted compulsory debt moratoria in early 1933".
And get this, "the banks also received their share of Hoover's ire for their unwillingness to expand in those troubled times". Hoover actually lodged a complaint in the New York Times that "banks have not passed the benefits of these relief measures on to their customers". So, in the end, Hoover (Roosevelt, remember, inherited and expanded on this infrastructure) "and Congress agreed to transform the RFC from a generally defensive agency aiding banks and railroads in debt, to a bold 'positive' institution, making capital loans for new construction".
Comments (8)
Here is hoping Rosenberg actually reads the book. He was previously warning of the evils of "deflation."
Published: November 18, 2008 8:21 PM
Wonderful.
Published: November 18, 2008 8:34 PM
Murray Rothbard will be a name that lasts in the minds and hearts of people around the world long after the names of the network of pawns of the unConstitutional coup (and similar types in other parts of the world). Who would even want to refer to the imbecilic promulgators of the Dark Ages of economics in the future when there is a classical liberalism civilization freed from the shackles of empirical economics and the corruption of politics.
Published: November 18, 2008 9:20 PM
It is wonderful to hear that the truth is spreading. Hopefully, America's Great Depression will soon become a classic.
Published: November 18, 2008 10:54 PM
This may be a good time to send Mr. Rosenberg a copy of Rothbard's essay "What Has Government Done to Our Money!
Published: November 18, 2008 11:23 PM
Better late than never
Published: November 19, 2008 6:37 AM
And a good time to send him a copy of Garrett's "The Bubble That Broke The World."
Published: November 19, 2008 7:47 AM
Some choice quotes from Dave's Piece. "[W]e could see the 'bottoming' out process take place closer to the 660 Fibonacci retracement (61.8% reversal) than the current 850-900 area we have been in for the better part of the past month."
"We do not profess to be promoters of libertarianism, but we think there is a lot of truth to what President Bush said." (In response to Bush's comments at the G20 on government not being a "cure all," and just one paragraph above the reference to Rothbard's 'must read' book.)
So Rosenberg learns from Rothbard that "Economic theory can generate a boom-and-bust cycle, and that depression will be prolonged and aggravated by inflationist and other interventionary measures."
Curiously, on the day following his "It may not be the 1930s for the economy, but ..." a piece with his name to it entitled "Deflation: you ain't seen nothing yet" is published, "warning" of deflation.
Overall, an interesting commentary.
Published: November 19, 2008 9:06 PM