Heckle and Jekyll: How Murray Rothbard Got the Fed's Story Right

0:00One of the advantages that I have with my last name, North, is it is summarized in English as N.O. period. And because of that, I am the one person in this room, and in fact in the world who can say of Dr. Paul, that I am Dr. No's Dr. No. Before I begin, I want to mention something. We are the heirs of Ludwig von Mises, beginning in 1912 with his book The Theory of Money and Credit. We are the intellectual heirs of that man. Pygmies standing on the shoulders of a giant.

0:47And of course, in terms of Rothbard, we are Pygmies standing on the shoulders of two giants. There are a few men left who studied with Rothbard,

1:04but we don't know most of them because Doug French is one of them, but Rothbard was not given the opportunities to serve in a university that would produce PhD and advanced students. So not many left who studied with him personally. A few left who studied with Mises. There are older men. They are retired. Israel Kirzner did. There are others. George Reisman, Eberdine University, just a handful left who studied with Mises. There is only one man left who taught with Mises at NYU and he is here today, one of the giants in our field, needs recognition. Bill Peterson, you stand up. You stand up.

2:04He was the one man at NYU who understood that Mises was right and who recognized that Mises and who recognized that Mises was the giant figure that he was. The remainder of the faculty was hostile to him. And that, again, is an indication of just how bad American academia has been in the field of economics and for how long. Rothbard, I can assure you, would have delighted at this meeting Because he would have understood fully what we are doing here. That is, we have come to a place where 100 years ago the meeting was held that formalized the foundation of the Federal Reserve system.

2:55And he would have understood very clearly that, ladies and gentlemen, we are on unhallowed ground. And it's not often that Americans will go to a place not because of the marvels of what historical event took place, But of what unscrupulous chicanery took place that we would come and have a conference of this type and at this expense. And I want you to understand that everyone in this room, by doing this, has identified himself as part of the extreme right-wing fringe of America.

3:41Everyone. You may not understand the categories. The right-wing fringe is the group that says that central banking is inherently wrong and that the Federal Reserve should be abolished. The extreme right-wing fringe of America is libertarians who say that the Federal Reserve should be abolished and have enough money to come to a conference. And you are part of that fringe.

4:26The meeting was held, as you know, in 1910. It was held in November, and it was held in November for a specific reason. And the reason was the island shut down during the winter and did not reopen until January. And so there was only a skeleton staff on the island at that time. Every member of that staff was sent off the island, and those people were replaced only by people from the mainland who normally had no connection with the staff here and would not be able to recognize any of the individuals, the seven individuals who met over in the main hall for a period of between, we're not sure, between seven and ten days to hammer out the basics.

5:26As you may know, it began on a date which we remember for another reason, November 22nd of 1910 and it began in Hoboken, New Jersey late at night on a private train that was owned by Nelson Aldrich, who was the senator from Rhode Island and who was the in-law of The Rockefellers, and his grandson was named Nelson Aldrich Rockefeller. Aldrich had a private train. He was a rich man. He was known, for good reason, as the Rockefeller Senator.

6:15And on his train, seven of them came down, and they left not from New York, where they might be recognized, but they left from Hoboken, New Jersey. And sure enough, the best laid plans of Mises and Men go awry, and at the train station, there were a bunch of reporters. Why? It's never been said. Tip-off, perhaps, we don't know, but they were there. And they didn't interview them, but they came down, and they landed next day at Brunswick, and where we, at that point, would have gotten off. There was of course no causeway at that time.

7:02And they were all on a first name basis. Nobody used his last name. It was later known as the First Name Club. They met for many years thereafter. And the station manager said, And well, gentlemen, good to see you. We know who you are. And the reporters are outside. And so one of the members, most associated, or at least highly associated with J.P. Morgan, who probably gave the invitation for them to come, stepped outside, said something to The group came back inside and said they will not mention this. There will be no problem.

7:56And they did not mention it and there was no problem. There was no reference to this meeting except one brief article in Forbes by the founder of Forbes who in 1916 gave gave one paragraph to it. There was no further mention of it so far as I'm aware and even as so far as the web is aware until a biography of Aldrich was published in 1930, 20 years after the meeting. That was the Jekyll Island meeting as far as anyone knew for the first 20 years after that meeting. 17 years then, in other words, into the passage of the Federal Reserve Act.

8:48Now I've entitled my speech Heckel and Jekyll. I couldn't resist. It was too obvious. Heckel and Jekyll were cartoon characters from 1946 to 1966, a pair of black magpies.

9:09We see nothing of them anymore. You don't hear about Heckel and Jekyll. They were a cunning couple of guys who were always running schemes of one kind or other. One of them was clearly a New Yorker with a New York accent and the other was British, always running Operations of One Kind or Other. And the New York magpie is almost the incarnation of Murray Rothbard. I could not resist it. And not only in terms of what the magpie did, but in terms of what Rothbard did. Murray Rothbard, as a PhD economist, stood in the true fringes of academia, a pariah within the profession, and constantly reiterated the economic logic that was presented in 1912 by Ludwig von Mises and The Theory of Money and Credit applied to the Federal Reserve system saying it is a cartel, it is not for the people, it is for the bankers that this exists and only for the large New York banking establishments, that it is counterproductive, that it is not part of a free market social order, that it was an inside operation from

10:46from Day One and that it is getting a free ride within academia. Murray Rothbard's book on America's Great Depression was published in 1963 because he had been associated with the Volcker Fund and the Volcker Fund money was still being used to publish his material. About six months before, maybe a little longer before, his book Man, Economy, and State was also published by Van Nostrand, also funded by the Volcker Organization. And in Man, Economy, and State, there is a chapter on money. And I contend that in any book that is of major importance, that is a comprehensive or treatise on economics, that is the clearest, most cogent, most definitively argued presentation in favor of free market money and opposed to central bank money that had ever been written at the time. The book was unknown for years. It was not known even within libertarian circles for many years. I was fortunate to get a first edition within really a few weeks of its publication and in 1963 I sat down, I read it, and I also read the book that he had just published called

12:16America's Great Depression in which he blamed the expansion of monetary reserves by the Federal The Federal Reserve in the 1925 to 1929 period as the basis of the bubble of the stock market and the basis of the misallocation of capital that resulted from that bubble and therefore when he came to discuss what we regard as the Great Depression, the period from 1930 to 1933, he blamed Federal Reserve policy not of the 1930 to 1933 period but Federal Reserve policy from 1925 to 1930.

13:01And in that same period, in that same year, in that same town, was published a monetary history of the United States, published by Princeton University Press, co-authored by Milton Friedman and Anna J. Schwartz, who also talked about the causes of the depression and they blamed the failure, supposed failure of the Fed to expand monetary reserves from 1930 to 1933 as the reason why the Great Depression became a catastrophe. And it was that argument that was picked up by virtually every school of thought of all economic persuasions by the media and it has been reiterated ever since that it was the It was a failure of the Federal Reserve to expand monetary reserves from 30 to 33.

13:59That was the cause of the Great Depression and it was not true. Especially in 32 and 33. It was not true. They expanded reserves. The reason was the banks were collapsing. There was no FDIC. That was why you had the contraction. Nothing to do with Federal Reserve policy. everything to do with the fact that 9,000 banks went belly up, 4,000 of them in 1932 and 1933, period, really most of it in 1933, enormous contraction as a result of collapsing banks, which had nothing to do with Federal Reserve policy because the Fed wasn't in charge, there was no FDIC, the banks simply went under. So Rothbard as the The ultimate heckler, the ultimate master of the heckle, spent his career in the wilderness, academically speaking, bringing accusation based on cogent presentation of facts and theory, to explain why it was the prior Federal Reserve policy that led to the bubble and it was not Federal Reserve policy in terms of contraction of the monetary base from 30 to 33. Both arguments presented

15:22The same year, the same town of publication, Princeton, New Jersey. The academic world simply ignored America's Great Depression for 20 years and it was not until finally one of the great historians of the 20th century, and I would almost contend the greatest writing historian of the 20th century, Paul Johnson, in his book Modern Times, went back to the discussion of the crisis of the 30s, found Rothbard's America's This Great Depression and relied upon that presentation to explain why that there was the collapse of the American economy from 1930 to 1933. That was the first academician of any reputation who accepted Rothbard's thesis.

16:08And for that I am exceedingly grateful. It was a very strange thing as I was reading, and it was a magnificently written book, as Because I was reading this book and I got to the section and I'm saying this narration is extraordinary. The only person to write this would be Rothbard and I turned to the back where the footnotes are and there he cited Rothbard's America's Great Depression. I was stunned, first time in my career, first time in my career that I had seen that happen from the time in 63 when I read that as a man just out of college until I had received With my Ph.D. I found no other case of a mainstream, respected academician who took seriously Rothbard's thesis. Rothbard was the ultimate heckler and destroyed his career as a result of it in terms of fame and fortune and potential reputation.

17:01Now with respect to Jekyll, why Jekyll? Because of Jekyll Island. they think well everyone in this room is here and so everyone in this room thinks well of course Jekyll Island 100th anniversary of course capital O capital C of course I challenge you go back to your rooms if you brought a microcomputer along to plug into Wi-Fi or do it at home oh I challenge you to Do the following test, interesting test. Type in to Google the words, Federal Reserve, Jekyll Island. You can do it two ways, as four words, click, or you can do it the advanced, super duper way, quotation mark, Federal Reserve, quotation marks, Jekyll Island, go click.

18:01Now here is my challenge to you. Find one link in the first five pages that is not to extreme right-wing fringe. Look for a CNN, an NBC, a CBS, a Time, a Newsweek. Look at any conventional mainstream media link at least in the first four pages of Google. Now What you will find is link after link after link to G. Edward Griffin's The Creature from Jekyll Island, which by the way is a book that is as good as the title and from a marketing standpoint the title is magnificent. I say that as a marketer. And Ed Griffin wrote a fine book, but he is not a Ph.D. economist. He is an extreme right-wing fringist with and Card-Carrying Capabilities, and he is not considered anything except a crackpot within the academic community.

19:05This story is no more known 100 years later than it was in 1915 prior to that one article by Bertie Forbes about the meeting. This is a blackout, and it is a blackout of monumental proportions, is one of the most important events of modern American history and ultimately, really, given the power of the Fed and the American economy, this is one of the most important historical events of modern times. And it is blacked out. It is not in the textbooks. It is not in the mainstream media. It is limited to peculiar, fringe groups like this. So you've got Heckel, and it cost Rothbard his career, and you have Jekyll, which is still buried, and if you ever go public with it, you are immediately automatically classified as right-wing fringe member. And there are very few economic historians or conventional historians or writers of textbooks who have any desire to wind up like Murray Rothbard.

20:18Now what does it mean? I would say, you people, because of who you are and where you are and what you've read, are in a very special situation. And because of that, there is no escape from personal responsibility. Because you don't get anything in life without personal responsibility. If you have received the benefit, you are responsible for doing something with that. And that, I think, any ethical system that I've ever seen, would accept. So you have have enormous responsibility, though you think it's just a small little group coming together for a peculiar discussion, listening to academics chatter on about an event that has essentially been buried for a hundred years. Now there is an attempt to get this story out by people who clearly are part of the right-wing intellectual fringe, but are intellectuals indeed, and that is most of all, of the Mises Institute.

21:15And I would say, if you have not read the background of the ultimate heckler, if you have not sat down personally and read the heckle, then it is time that you do it. And here's how you start. What has government done to our money, 1964, as fine a statement as I have ever read in my career, and I've been reading this stuff for over 50 years, the finest statement on The monetary theory that I've ever read, written by Rothbard almost as probably an afternoon, I suspect, maybe two, probably did it in two afternoons. The next thing you do after you read that, and I suggest you read it, is you get Man Economy and State and you read the chapter on money because that's going to give you the background, the real background of monetary theory.

22:03And you need to know that. It's not good enough to be a heckler if you don't know why you're heckling. It's not good enough to know about Jekyll Island if you just know about Jekyll Island and the meeting. And once you have done that, you can then, in good conscience, sit down with Rothbard's book on the case against the Fed. And if you don't want to do that, and you want to do the real hardcore stuff, get his book on the history of money, because it's all in there. That section is found inside that, but it takes you all the way back through the 19th century. Tremendous presentation of the history of the war between central bankers and free market economics and free market banking policy.

22:57Policy, and you'll find this war, this was not a recent event. This has been going on in the United States since 1790, and it keeps coming back. It keeps coming back. It is the creature from Jekyll Island, but it started really much earlier than Jekyll Island. Now for those of you who are really hardcore types, who really want to get the full story, then Then you go to Rothbard's book, The Mystery of Banking, which is the only upper division level textbook for an upper division college class in money and banking in which he says, the author says, that fractional reserve banking is immoral, a matter of fraud, a matter of and Forcible Wealth Redistribution.

23:54That kind of language does not appear in academic presentations, certainly not in textbooks. But the mystery of banking is a very clear statement of how the process really works. And I commend it to you. Now finally, for those of you who said, I think I'd rather come here and listen to economists I want you to get out your checkbook and make another decision, and that decision is, for

24:40the same amount of money as buying a bullion gold coin, how many students could you bring We're turning this summer to one of the Mises University seminars, week-long seminars, either undergraduate or graduate. If you wrote a check for that one ounce coin, how many students could you bring in? You can drop Rockwell a letter and ask him. And when there's a thousand bucks on the line, Rockwell will respond. Because it's not about just buying one ounce gold coins to cover your backside when this monstrosity, and by the way, Murray would have called it and did call it a monstrosity, when this monstrosity brings disaster to this country and the monetary system, what will you have done to put on the brakes?

25:38And more important, long-term, what will you have done to train the next crew of academic economists who will go out and shatter to understand why it was that this monster, this creature from Jekyll Island, was able to get away with gigantic fraud, with the absolute silence of the academic profession and, understandably, the absolute silence of the major New Yorker of Banks. Because ultimately we do face one threat within the Fed, and it is a threat. And that is there will be enough votes to say, end the Fed, and Congress will say, we will absorb the Fed. And we move from Bernanke to Barney. And that scares me.

26:38Bernanke wants his reputation as an economist not to have presided over the destruction of the dollar. I guarantee you he wants that reputation. He does not want the footnote as the man who destroyed the dollar. And I don't think Barney Frank would care. It is not enough to end the Fed, it is enough to end central banking, But not at the expense of having the United States Congress take over the function of the central bank. That would be a catastrophe laid on a catastrophe. So, you have come, you have, as we used to say in the right wing, you have come to eat, meet and retreat.

27:25And now it is time to go back and if we come again, eat, meet and defeat. I wish you well.