Here’s a reply I just wrote to an email asking me where a certain person got the idea that the economy was in recession 40% of the time in the nineteenth century. I am calling the person X, because he’s about the most uncharitable (and uncomprehending) antagonist I’ve ever faced — yes, even a genial guy like me has antagonists — and I’m all done dealing with him.
“I’d tell you where he gets it from, but my answer would be too crude. X is a real estate agent who knows as much about nineteenth-century economic history as any other real estate agent. (I am not saying real estate agents are ignorant, you understand, but that they tend not to be experts in this highly specialized area.) Yes, there were recessions, but contemporaries correctly blamed them on excessive issue of bank credit, often pushed by federally chartered national banks. Austrians oppose this kind of activity in the first place, so X proves nothing by citing these panics. Rothbard shows in his book The Panic of 1819 (Columbia University Press, 1962) that many people decided, in the wake of that panic, that the best policy was 100% reserve banking in a completely private system. We never got that. That system, say many Austrians, is the only one that would put a stop to the boom-bust cycle. Continue Reading →