Table 7 of America’s Great Depression [page 109 in the printed book, and available here in pdf] is a key part of the book.
It purports to show that the increase in money supply during the 20’s was not due an increase in the quantity of gold, but rather by an increase in those components of the money supply that are controlled by the Fed.
The columns of the table represent 12 different time periods that make up the 20’s. In each column, there is a detailed listing of the 6 components of bank reserves controlled by the Fed, of the 4 that are not, and then begins the arithmetic.
The 6 components are added up and their sum is called “controlled reserves”, the other four also added up seperately and called “uncontrolled reserves”. It is shown that the “controlled reserves” numbers are mostly positive [=increase the money supply, i.e. inflationary], while the “uncontrolled reserves” are mostly negative [=deflationary]. And when you add up all the controlled reserves for the decade, and the uncontrolled ones for the decade, it’s clear that the conrolled are a huge 1.6 billion more than the uncontrolled [which are in sum negative]. So that the Fed was producing the inflation; it wasn’t caused by anything else.
This argument is very strong and convincing, but it hinges on one thing: getting your numbers right. In other words, you have to be careful that you add up the 6 components under fed control without making a mistake.
If, for example, you add 1+2+1+3+4-9, you have 2 as a result, not , say 15. Same thing with the 4 uncontrolled reserves. Make sure you add them up right.
And that is the problem. There are mistakes in 4 out of 12 columns. Mainly, in columns 1, 4, 5 and 8. In those four columns the whole is different from the sum of its parts.
Let’s discuss column 1 as an example of what I’m talking about. In column 1 Total Controlled should be -883, given the other numbers [not 462, a huge huge error] , and uncontrolled should be a whopping 1042 [not -303, another huge error] . Note that1043-883 is 159, so that the bottom line of 157 is fine, given that there are rounding errors, as Rothbard notes. But that doesn’t help us with Rothbard’s thesis. The positive numbers are supposed to come from controlled reserves [proving the Fed is inflating], and the uncontrolled numbers are supposed to be negative in this column, showing the gold supply was not inflating the money supply, since banks were offsetting that by paying off debt, as Rothbard writes on page 113. Instead the “controlled” number is deflationary [negative], and the “uncontrolled” is inflationary [positive], exactly the opposite of what Rothbard claims.
This puts a big hole in Rothbard’s argument.
Anyone here who can help with this?