America was in the thick of the Great Depression when one of the first great books attempting to explain it was published. Banking and the Business Cycle focuses on money, credit, and the policies of America’s central bank. The Federal Reserve, the “bankers’ bank,” was not only the cause of the initial crash, but also the reason why it took so long for the country to recover.
The book presents a three-part explanation of the whole swing of the business cycle. The first part is the monetary explanation of the boom. The second presents a structure-of-production explanation of the specific nature of the instability of the boom. And finally, the third is an equilibrium theory, which goes a long way toward explaining why this particular “bust” dragged on so long.
The wisdom presented in Banking and the Business Cycle applies today just as much as it applied during the Great Depression.