Book Review: Lincoln Unmasked by Thomas J. DiLorenzo

Imagine that one day everything that you were taught as a child comes out to be a mirage of the truth. What would you do? American children in public schools, including myself, are taught that honest Abe was a great man. He freed the slaves and united a nation, right? But what if it wasn’t so black and white? What if history overlooks a lot of the ills of Abraham Lincoln?

That is what Thomas J. DiLorenzo, professor of economics at Loyola College, tries (and does) answer in his book “Lincoln Unmasked: What You’re Not Supposed To Know About Dishonest Abe.” DiLorenzo does an excellent job of taking Lincoln piece by piece and dismantling the myths of Lincoln with chapters titled “The Great Railroad Lobbyist, The Great Protectionist, & The Great Inflationist.” When most people think of Lincoln they don’t think of his monetary and trade policies. But they should.

For example, most people do not know that pre-Civil War, there was no clear central monetary system in the United States. Andrew Jackson had just finished dismantling it and Lincoln was an strong supporter of a central bank and a national currency. This, of course, would hardly interest a 3rd grader learning about honest Abe, but is it very important in thinking about the way the country as a whole raises funds. With an unlimited central bank with a national currency that was backed in nothing, government spending could go hog-wild and it did.

Another interesting tidbit about the book was the state of slavery at the start of the war and how much wheeling and dealing the so-called “Great Emancipator” did to not free slaves. DiLorenzo points out that early in the Civil War Lincoln made it clear that he did not want to ban slavery he just wanted to centralize the government and keep the states together. This is shown with evidence through his agreement to allow border states to keep slavery as long as they stayed in the Union. Along with the fact that Lincoln actually was more supportive of a deportation of former slaves then to keep them here.

The last major point to take away from this book is the destruction of states rights and federalism. When looking back one might think that it was a slow demise but DiLorenzo suggests that Lincoln murders it outright. This is an important point to debate because federalism and decentralized government is good for the nation and at some point demised. And the reader must ask themselves, is it okay for a state to leave the union peacefully? And what role does that play in keeping the federal government in check? Though this might be one of the hardest concepts for an average American reader to grasp because with the sense of patriotism that has been indoctrinated it would be hard for them to imagine the United States without 50 states.

The only negative that this book has is that it is so short and a quick read. I am sure that this was Dr. DiLorenzo’s intention to have an easy read to spread the ideas to the masses but it left the reader wanting more. It also does such an efficient job at telling the story and illustrating the point that an average American reader may reject it thinking that they found the answer too easily and will not take the time to do the research themselves.

Overall, I highly recommend this book to all who want the other side of the story and love history.

5/5

 

Inflation is looming on America’s horizon By Martin Feldstein

The article of the day comes from the Financial Times:

The US last week showed its first signs of deflation for 55 years, prompting inevitable fears of further deflation in the future. Yet the primary reason for the negative rate of US inflation is the dramatic 30 per cent fall of commodity prices. That will not happen again. Moreover, excluding food and energy, consumer prices are up 1.8 per cent from a year ago. That is the good news: the outlook for the longer term is more ominous.

The unprecedented explosion of the US fiscal deficit raises the spectre of high future inflation. According to the Congressional Budget Office, the president’s budget implies a fiscal deficit of 13 per cent of gross domestic product in 2009 and nearly 10 per cent in 2010. Even with a strong economic recovery, the ratio of government debt to GDP would double to 80 per cent in the next 10 years.

There is ample historic evidence of the link between fiscal profligacy and subsequent inflation. But historic evidence and economic analysis also show that the inflationary effects can be avoided if the fiscal deficits are not accompanied by a sustained increase in the money supply and, more generally, by an easing of monetary conditions.

The key fact is that inflation rises when demand exceeds supply. A fiscal deficit raises demand when the government increases its purchase of goods and services or, by lowering taxes, induces households to increase their spending. Whether this larger fiscal deficit leads to an increase in prices depends on monetary conditions. If the fiscal deficit is not accompanied by an increase in the money supply, the fiscal stimulus will raise short-term interest rates, blocking the increase in demand and preventing a sustained rise in inflation.

So the potential inflationary danger is that the large US fiscal deficit will lead to an increase in the supply of money. This inevitably happens in developing countries that do not have the ability to issue interest-bearing debt and must therefore finance their deficits by printing money. In contrast, when deficits do not lead to an increased supply of money, the evidence shows that they do not cause sustained price increases. (more…)

Give Bernanke Credit—For Chutzpah by Robert Higgs

Today’s article of the day comes from the Independent Institute:

In my mind’s eye, I envision a street fair—one of those happy community gatherings at which sellers of handcrafted ceramics, funky clothing, herbal remedies, fresh vegetables, and edible delicacies congregate to display their wares for the strolling customers, who chat amiably with the stall-keepers and with one another. Suddenly, amid horrified shrieks and the roar of a giant engine, a truck plows through this placid setting, scattering twisted debris and broken bodies in its wake. Finally, after wreaking a hundred-yard swath of death and devastation, the truck stops, and the driver, Ben Bernanke, climbs down from the cab.

“People, people,” he exhorts them in a calm, world-weary voice, “do not panic. I am here to assess the damage and make recommendations for reforms that will prevent a recurrence of this unfortunate and wholly unforeseen act of God.” Whereupon he proceeds to lay out his assessment and recommendations, always speaking in the same quiet, unemotional voice. The stunned and wounded survivors gaze at him in astonishment. “He’s a madman,” one cries out.

Undismayed by the swelling chorus of curses and the groans of the injured, the truck driver addresses the gathering crowd of stunned onlookers. “We must have a strategy that regulates the street-fair system as a whole . . . not just its individual components.” He then methodically lays out a series of recommendations for strengthening the construction materials of stalls and regulating their placement along the street, for ensuring that each transient merchant have an adequate capital cushion against such crises, for monitoring fruitmongers and hippy artists deemed “too big to fail,” to keep them from taking excessive risk. He proposes that the city council consider new ordinances to require that wooden crafts such a birdhouses be made sturdier and to establish a “limited system of insurance” to protect against customer runs on the most daring drug-paraphernalia sellers.

“Moreover,” he continues, “street fairs are too important to be left for each town to regulate on an ad hoc basis.” He proposes that the rules be harmonized among the mayors of all the world’s great cities and that a global street-fair authority be created to monitor street-fair risks and protect the people from accidents such as the one that has just occurred. Listeners look on in amazement, their mouths agape. (more…)