Even the most innocent novel can give its reader a fresh perspective on the economy during the author’s time. Economic writings and economic conditions often inspired great writers who, in turn, allowed us to contemplate either a glimpse or a detailed picture of economic reality. Stendhal was influenced by Malthus, Flaubert by Bastiat, and Ayn Rand by Mises. Other novelists faithfully described the economic times of their lives. Émile Zola, for instance, brilliantly accounts for the French 1882 financial crisis in his novel L’Argent (1891) and unconsciously exhibits the evils of fractional reserve banking.
Just as Zola’s L’Argent, so too F. Scott Fitzgerald’s The Great Gatsby (1925) is a product of the business cycle. Some have interpreted Fitzgerald’s novel as an indictment against capitalism. It is not. It has been said that Gatsby is a product of alcohol prohibition, but Gatsby is also the unfortunate product of the Federal Reserve’s expansionist monetary policy. The “constant flicker” of the American life described by Fitzgerald in his celebrated novel is no less than the artificial boom driven by the Fed during the roaring twenties.
Inequality and the Fed during the Twenties
The Franco-Irish economist Richard Cantillon was among the first to notice the redistributive effects of monetary creation. Cantillon observed that the first to receive the newly created money saw their incomes rise whereas the last to receive the newly created money saw their purchasing power decline as consumer price inflation came about.
Under modern central banking, money is created and injected into the economy through credit on financial markets. Thus, the economics of Cantillon effects tells us that financial institutions benefit disproportionately from money…