The Essential Rothbard - Ludwig von Mises Institute

46 The Essential Rothbard
Rothbard describes in careful detail the motives and policies of
the Federal Reserve during the 1920s, stressing the cooperation
between Benjamin Strong and “the Mephistopheles of the inflation
of the 1920s,” Montagu Norman of the Bank of England. 105
His verdict is severe:
We may conclude that the Federal Reserve authorities, in
promulgating their inflationary policies, were motivated not
only by the desire to help British inflation and to subsidize
farmers, but were also guided—or rather misguided—by the
fashionable economic theory of a stable price level as the goal
of monetary manipulation. 106
When disaster struck in October 1929, many economists, still
under the delusion of price stability, urged increased government
spending; and Rothbard devotes much attention to their views and
activities. Unfortunately, President Hoover enthusiastically
embraced their views. Although Hoover
was only a moderate inflationist relative to many others. . . .
Seeing money-in-circulation increase by $800 million in
1931, Hoover engineered a coordinated hue-and-cry against
“traitorous hoarding.” “Hoarding,” of course, meant that
individuals were choosing to redeem their own property, to
ask banks to transform their deposits into the cash which the
banks had promised to have on hand for redemption. 107
Worst of all, Hoover’s constant efforts to prop up wages helped
prolong mass unemployment.
Hoover had prevented “an immediate attack upon wages as a
basis of maintaining profits,” but the result of wiping out
profits and maintaining artificial wage rates was chronic,
unprecedented depression. 108
105
Ibid., p. 154.
106
Ibid., p. 181.
107
Ibid., p. 306.
108
Ibid., p. 322.