Abolish the Reserve Bank
In his latest book, The Evil Princes of Martin Place: The Reserve Bank of Australia, The Global Financial Crisis and The Threat to Australians’ Liberty and Prosperity, investor Chris Leithner applies Austrian economic analysis to counter the critics who have blamed capitalism for causing the financial crisis that began in 2007. It was not the free-market that failed, argues Leithner, but government intervention.
Specifically, he pins the blame upon an institution revered in modern society: the central bank. Most of readers of this blog are familiar with the nefarious schemes of the Federal Reserve, but what makes Leithner different is his focus on the Australian central bank.
Australia escaped comparatively unscathed from the financial crisis, however as Leithner points out in the book, there is an asset price bubble just waiting to burst. Real estate is drastically overpriced.
The Reserve Bank of Australia (RBA) masquerades as a scientific and independent organisation, but Leithner suggests that it is far from benign. Through its high inflation policies, the RBA is responsible for setting Australia on an unsustainable growth trajectory that culminated in the financial crisis and will cause crises in future.
By setting interest rates too low, the RBA encourages speculative borrowing and misleads investors into starting projects that they would not otherwise have begun. It encourages individuals to consume, rather than save. The problem is that interest rates are kept artificially low – they are not what the market would have set in the absence of government intervention. This sets in motion a chain of events leading to financial ruin.
Most of the book is about the Federal Reserve and the American economy, so readers who are familiar with the work of notable Austrians such as Tom Woods, Robert P. Murphy, Walter Block, Robert Higgs etc will not find much new. Only two chapters (94 pages) are specifically about Australia, although the Introduction and a few of the other chapters have Australian analysis scattered throughout them too. Where Leithner really shines, though, is in his analysis of how fractional reserve banking is constructive fraud and how it goes against Christian principles.
It is rare to find libertarian political philosophy, economics, law and history in one easy-to-read book for beginners, and I’d recommend everyone take a look at this book. An introductory chapter is available for free online at Liberty Australia.
Table of Contents
Introduction
Part I: Global Financial Crises and Their Cause
Chapter 1 A Failure of Government – Not of Liberty
Chapter 2 Plus Ça Change: the Panics of 1907 and 2007
Chapter 3 Deposits ≠ Loans
Chapter 4 The History of Banking Is the History of Bank Failures
Chapter 5 How Banks Misappropriate Deposits and Counterfeit Money
Part II: Counterfeit Money, the Central Bank and the Welfare-Warfare State
Chapter 6 Fractional Reserve Banking Is Utterly Fraudulent
Chapter 7 The Central Bank and the Welfare State of Credit
Chapter 8 Monetary Central Planning Inevitably Fails
Chapter 9 The Monetary Roots of Democratic Pathologies
Part III: Where We’ve Been, Where We Are and Where We’re Headed
Chapter 10 Minimal Intervention Means a “Good” Depression (1919-21)
Chapter 11 The Central Bank Inflates the Boom (1922-29)
Chapter 12 Massive Intervention Means a “Great” Depression (1929-46)
Chapter 13 The RBA Helps to Stoke the Artificial Boom (2002-2007)
Chapter 14 The RBA Delays the Genuine Bust (2007-2010)
Part IV: Where We Should Go
Chapter 15 Conclusions for Liberty and Prosperity
Chapter 16 Suggestions for Further Reading