If called upon to outline the arguments of each position, they could not do it. They have no idea of what they have read. They are utterly confused. Why? Because they do not read books on economics. They read only websites.
For years, I was one of “they”: I was trying to educate myself about finance, investing and economics by reading only websites. I wasted a lot of time. I eventually discovered the 3 books that Gary North recommends below.
If you are confused, you can get clear by reading three short items: Rothbard‘s mini-book, What Has Government Done to Our Money? (pdf), my mini-book, Mises on Money, and Rothbard’s The Case Against the Fed (pdf). All of them are free. If you really want to understand, read Rothbard’s textbook on money and banking, (pdf). It is free. Then you will be ready for the booklet published by the Federal Reserve Bank of Chicago, Modern Money Mechanics.
I sent the above quote to a friend who wrote back that he finds reading economics books incredibly tedious. Not long ago, I would have had the same reaction. What changed?
First, I read Ayn Rand‘s novels, The Fountainhead and Atlas Shrugged. Then I read her non-fiction book Capitalism. At least, I tried to read it: I found it so infuriating, I kept throwing it down. Rand wrote as if she were the originator of the ideas she propagated, but that was not always true, especially in the field of economics. Somehow, probably via Internet links connecting Ayn Rand to Austrian economics, I made the transition, and I’m glad I did. Though Rand was strong on first principles, she was not an economist.
Rand opened my eyes to the power of ideas, particularly to ideologies. She understood and was quick to grasp the underlying philosophies or ideologies behind superficially innocuous, everyday statements or expressions (she gave a few examples in her West Point address, “Philosophy – who needs it?“). “What are your principles?” Rand asks the young Nathan on meeting him for the first time, in the movie The Passion of Ayn Rand.
Austrian economics is based on many a priori principles of human action, and so it differs largely from other schools of economic thought which really on mathematical models and large amounts of data and aggregates. Reading Mises’ classic, “Human Action” requires no math; there are no graphs to decipher. It is more about psychology and philosophy, and focuses on first principles. This is, to my mind, what makes it interesting. Understanding first principles enables one to understand better human action, the events and circumstances that we live in today and which seem to shift constantly and be based on no clear principles at all. Understanding first principles enables one to peek into the future and make educated guesses about what might happen.
Here’s a video montage of Peter Schiff, schooled in Austrian economics, forecasting a major economic crisis on a number of TV shows, starting way back in 2006. Notice the guffaws. Have these clowns changed their tune? Is the Pope a black woman? Mises himself wrote the following in “Human Action”: There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of the voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.
Did he have a crystal ball? No. He simply understood fundamental economic principles. Schiff and Mises were right. Almost everyone else didn’t see it coming. Those principles helped Mises and Schiff to see into the future and predict accurately the results of certain actions. (Mises was smart enough to escape from Europe before the Nazis closed the door.) I want to know those principles. Wouldn’t you?
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