Elgin Groseclose, an eminent monetary economist in the 20th century, rips the roof off the Federal Reserve in this wonderful history that takes us from the Fed's founding to the 1960s. He shows that the gap between the promise and the reality is shockingly massive, so much so that the Federal Reserve must be considered one of the greatest failures in the history of public policy.
Grosecloses's treatise on the subject contains research unavailable anywhere else. He was meticulous, having spent many years culling through the archives of every institution and person involved with Fed decision making. In case after case, he chronicles the policy failure, and the relentless decline in money's quality from the Fed's inception and forward.
As just one example, the opening chapters unearth an editorial from the New York Times, which denounces the idea of the Fed as an example of the "shallow sophistries of (Theodore) Roosevelt Socialism," and further said that the American people are too intelligent and have too much common sense to put up with a central bank like the Fed. So not only was there opposition to the Fed, it had a voice and its predictions of a coming calamity turned out to be right on.
He shows that at no time in its history has the Fed actually achieved what it promised: low inflation, economic stability, stable growth, reliable regulation of the banking system. Groseclose goes further to show that the Fed has generated unrelenting cycles and inflation and been the major fuel for the growth of government -- politicizing the whole of American economic life.
As a side benefit, the cover art of this book-though you can't see it in this photo-is actually built by thousands of tiny paper dollars.
302 pages, softcover, 2009
America's Money Machine
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3 of 4 people found the following review helpful
Format:Hardcover
Elgin Earl Groseclose (1899-1983) was an American economist, statesman, and author, who was appointed Treasurer-General of Persia by the order of the parliament of Iran in 1943; he also headed the Persian Relief Commission. He has written other books such as Ararat, Money and Man: A Survey of Monetary Experience, Introduction to Iran, The Decay Of Money: A Survey Of Western Currencies, 1912-1962, etc. The first edition (1966) of this 1980 book was entitled Fifty Years of Managed Money; the Story of the Federal Reserve, 1913-1963.
He poses the question, "If one man may buy in the market only by the exchange of goods won at the cost of some human labor and effort, while another need only rub the Aladdin's lamp of banking and thereby draw purchasing power from the air in the form of crisp banknotes, what are the effects upon the prices of goods in the market, the distribution of ownership of these goods, and the state of contentment or discontentment among the several classes of the citizenry as they are affected by this process?" (Pg. 37)
He notes that in 1922 the Federal Reserve "quietly began to abandon reliance upon the discount rate as a modifier of the economic climate," and began relying more upon open market purchases to force credit into the economy, or to withdraw it. (Pg. 122) He observes that "there is nothing sacrosanct" about a fixed minimum reserve ratio, and points out that "when confidence is threatened no reserve requirement short of 100 per cent will meet the bill." (Pg. 245)
He argues against the "misconception that debt can be a form of money," since "A money system can be erected on nothing less than a transferable substance of market value, and any system lacking that cannot be called a monetary system." (Pg. 262) He concludes by proposing a return of the Federal Reserve to "near its original design---as a sort of safety valve against credit explosions," where credit could be issued only against "short-term, self-liquidating commercial paper." (Pg. 265)
Groseclose's book has a definite "conservative" orientation, but it also provides useful information that can be of interest to all political persuasions.
He poses the question, "If one man may buy in the market only by the exchange of goods won at the cost of some human labor and effort, while another need only rub the Aladdin's lamp of banking and thereby draw purchasing power from the air in the form of crisp banknotes, what are the effects upon the prices of goods in the market, the distribution of ownership of these goods, and the state of contentment or discontentment among the several classes of the citizenry as they are affected by this process?" (Pg. 37)
He notes that in 1922 the Federal Reserve "quietly began to abandon reliance upon the discount rate as a modifier of the economic climate," and began relying more upon open market purchases to force credit into the economy, or to withdraw it. (Pg. 122) He observes that "there is nothing sacrosanct" about a fixed minimum reserve ratio, and points out that "when confidence is threatened no reserve requirement short of 100 per cent will meet the bill." (Pg. 245)
He argues against the "misconception that debt can be a form of money," since "A money system can be erected on nothing less than a transferable substance of market value, and any system lacking that cannot be called a monetary system." (Pg. 262) He concludes by proposing a return of the Federal Reserve to "near its original design---as a sort of safety valve against credit explosions," where credit could be issued only against "short-term, self-liquidating commercial paper." (Pg. 265)
Groseclose's book has a definite "conservative" orientation, but it also provides useful information that can be of interest to all political persuasions.
By gotham metro
Format:Hardcover|Amazon Verified Purchase
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3 of 5 people found the following review helpful
Format:Hardcover
Groseclose is clearly on the conservative side of the aisle, and the back of my copy's cover contains a blurb attributed to Jesse Helms, April 23, 1979, where Helms compliments the author as "A scholar for whom I have great respect..." If that's enough to turn you off to the author, then you should probably stick with liberal authors like John Kenneth Galbraith. Galbraith's books such as A SHORT HISTORY OF FINANCIAL EUPHORIA or MONEY: WHENCE IT CAME, WHERE IT WENT will probably be better suited for you. Nevertheless, if one does not take offense to such conservative associations, then this book can still be approached as a useful body of information.
It should be noted that Groseclose is much too professionally trained to rehash the sort of dishonest claptrap spouted by G. Edward Griffin, Gary Allen, Eustace Mullins, Alex Jones, David Icke and other Right-wing hucksters. Rather than portraying the creation of the Federal Reserve System in 1913 as some sort of clandestine coup d'etat carried out by the Illuminati/Freemasons/Rockefellers/Rothschilds/lizards or anything similar, Groseclose traces the history of how the crisis of 1907 raised broad public demands for a change which led after several years of back-and-forth political give-and-take to the creation of the Fed. Groseclose interprets the Crash of 1929 as the result of real uncertainties in the market, rather than something craftily planned by the Learned Elders of Zion.
Nevertheless, his attempt to argue for a return to a gold standard was rather unpersuasive, in my opinion. In his concluding chapter Groseclose attributes to "many conservative economists" the idea "that an expanding economy needs a continually expanding money supply" and he attempts to equate this to the idea that "if a cloth merchant doubles his yardage sales he must double the number of yardsticks in his establishment." I found this to be a totally false comparison. The cloth merchant is not required to provide customers with a yardstick for every yard of cloth which they purchase. But every purchase within the standard economy requires some form of money to be paired with the good or service that is being received by one or more of the parties. Groseclose is here trying to push his gold standard argument, and at such points he can sound like a representative of the Mises Institute. Despite that drawback, Groseclose has produced a book which is vastly more reliable as a source of information than most of the rubbish which is in circulation right now. If you're taking an honest critical-minded interest in such monetary history then you will almost certainly find some use for this book.
It should be noted that Groseclose is much too professionally trained to rehash the sort of dishonest claptrap spouted by G. Edward Griffin, Gary Allen, Eustace Mullins, Alex Jones, David Icke and other Right-wing hucksters. Rather than portraying the creation of the Federal Reserve System in 1913 as some sort of clandestine coup d'etat carried out by the Illuminati/Freemasons/Rockefellers/Rothschilds/lizards or anything similar, Groseclose traces the history of how the crisis of 1907 raised broad public demands for a change which led after several years of back-and-forth political give-and-take to the creation of the Fed. Groseclose interprets the Crash of 1929 as the result of real uncertainties in the market, rather than something craftily planned by the Learned Elders of Zion.
Nevertheless, his attempt to argue for a return to a gold standard was rather unpersuasive, in my opinion. In his concluding chapter Groseclose attributes to "many conservative economists" the idea "that an expanding economy needs a continually expanding money supply" and he attempts to equate this to the idea that "if a cloth merchant doubles his yardage sales he must double the number of yardsticks in his establishment." I found this to be a totally false comparison. The cloth merchant is not required to provide customers with a yardstick for every yard of cloth which they purchase. But every purchase within the standard economy requires some form of money to be paired with the good or service that is being received by one or more of the parties. Groseclose is here trying to push his gold standard argument, and at such points he can sound like a representative of the Mises Institute. Despite that drawback, Groseclose has produced a book which is vastly more reliable as a source of information than most of the rubbish which is in circulation right now. If you're taking an honest critical-minded interest in such monetary history then you will almost certainly find some use for this book.
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