Laissez Faire Books have just released a splendid new edition of Doug French’s book, Early Speculative Bubbles, previously published by Mises.org. So how do I know this book is splendid? Because I wrote the new Foreword, which just by itself is magnificent. For those who want more of a breakdown, you can see a review I did of the first edition, here. Below, is the new Foreword to this book’s LFB edition, a book which mainly concentrates on the hard-money inflation of Tulipmania:
IN A SINGLE LIFETIME, there are only so many books you can read. Obviously, at the top of that time-limited list is Human Action, followed by Man, Economy, and State. Following that, you might add the Bible, and The Complete Works of Shakespeare. Though as I’ve yet to meet any man or woman who has actually read the whole of The Complete Works of Shakespeare, from cover to cover, then perhaps we need to add another book to fill that coveted fourth spot.
Should it be this book, the one that you currently hold in your hands?
Okay, so perhaps Lord of the Rings, the complete set of Patrick O’Brian novels and Socialism by Ludwig von Mises spring to mind ahead of this one.
Maybe even Sword of Marathon — by my very good friend, Jack England — earns that coveted fourth spot.
Yes, well, except for these magnificent testaments to the creativity and brilliance of mankind — especially when unleashed from the ten-thousand-year-old tyranny of the state — what should we read next?
Well, my friends, I think it has to be this book. Why? Because it is extraordinary, that’s why.
Why is it extraordinary? Because it is filled with the spirit of one of the greatest men who ever lived, Murray N. Rothbard, as propagated through the fingers of one of his lucky students, Douglas E. French. For where most Austrian economic texts deal with paper money, and its problems, this book deals with something most others have been afraid of exploring, which is hard, precious-metal money, and its problems.
There is a reason why centuries passed before any Austrians attempted to explain the problem of hard-money inflation, as opposed to the much easier subject of paper-money inflation, and that is because nobody possessed the requisite testosterone and the essential nerve to do it. And as a former American football player, Doug French possesses that requisite testosterone and that essential nerve by the syringeful.
How could hard metal fail? How could a 100 percent reserve of pure, physical silver fail? How could the Bank of Amsterdam fail — the hardest hard-money bank in the world, which made the goblin Gringotts Wizarding Bank look like a Federal Reserve outlet populated by Paul Krugman clones?
Tulipmania, based upon a banking system with a 100 percent silver metal reserve has to be explained. Otherwise, we are left with the madness of crowds as an explanation to everything, which our friends in government would love to be seen as the solution to everything, so that they can bring a hobgoblin promise of order to this supposed madness of crowds. But if you’re an Austrian, you believe that all events, no matter how illogical on the surface, possess a valid praxeological explanation.
And that is what Douglas French provides when describing Tulipmania.
I shall leave him to explain how hard-money metal failed, in this magnificent new edition of his book. However, let us assume for now that it had something to do with the power-crazed protection-racket gang known as the state. French uncovers how the chaos of government managed to mess up such a simple and otherwise perfectly functioning system of a totally voluntary money supply. He achieves this with the dexterity of a quarterback winning a Super Bowl in the last second, with one inch to spare on the final touchdown.
And just when you think he’s done, French also explains the South Sea Bubble and the Mississippi Bubble too, as a postgame treat. However, as these were both based upon paper monies and paper share certificates, it’s like men playing against boys. The real meat of this book is delivered in his section on Tulipmania, as supervised by Murray Rothbard, and as brought to us now by the hall-of-fame team of Laissez Faire Books.
Read something and learn.
I did.
This article was previously published at The Euro Vigilante.
The Bank of Amsterdam started out by claiming to be a warehouse bank: i.e. it claimed it was simply storing money and not lending it on. In fact it surreptitiously loaned large amounts to the East India Company and large amounts to the City of Amsterdam, which were never repaid.
I got that from an article by George Selgin. See:
http://www.freebanking.org/2011/05/31/the-state-and-100-percent-reserve-banking/