My favorite book is "Economics in One Lesson". It's available free online and in print from major book sellers (see the top search results on the Google). This book does not represent mainstream economic thought, but that's a good thing given the track record of mainstream economists in the current crisis.
Another good, "popular" Austrian-school book is What Has Government Done to Our Money? by Murray Rothbard. The Theory of Money and Credit by Mises is on same subject but it's more comprehensive, the tone is more academic and is considerably harder. Both are available online.
Looked at that collection. I've read a lot of Austrian stuff and I'd say that Hayek's elaboration of the trade cycle and the dynamics of international currencies are the two greatest works of Austrian Economics. They are not the basics by any means though and are pretty tough going, as hard as reading books on compiler design.
Indeed, that's the single best book to start with. E.g. the very first chapter, the "One Lesson" (on the Broken window fallacy: http://en.wikipedia.org/wiki/Broken_window_fallacy) will right off explain to you why "Cash For Clunkers" was such a clunker.
(Ignoring the solid principle that accelerating future economic activity fails when the future inevitably arrives, something we're seeing right now in US residential real estate.)
A lot of people think that the Cash for Clunkers program was actually the single most effective element of the recent US stimulation bill. It really did contribute to a burst in actual buying of products, thus, economic activity. Whereas despite all the money made available to financial institutions there did not seem to be a follow-on rise in new or extended credit for businesses and individuals; if anything, it got worse afterward.
What is the argument for why the CfC program was bad or ineffective?
"It really did contribute to a burst in actual buying of products, thus, economic activity."
Which it took from future sales.
Whether it's better or worse than financial institution measures has nothing to do with whether it was good or bad. If they were both bad and it was less bad, it's still bad.
The argument that it was bad is ... the broken window fallacy. Perfectly fine working cars that could have been sold to people who can't afford new ones were destroyed (the engine oil replaced with a chemical solution that destroyed it after running for a short period of time).
Yea, it's a classic book in the same way Keynes' "General Theory" was, but I'm not sure I'd say that Austrian economics (such as Hazlett, Hayek, Mises, etc.) is a good way of understanding our modern system.
To get a good balance, I'd say to read something from Paul Krugman, Rob Reich, Greg Mankiw to understand left, center and rightist views on neo-Keynesian thought. For "Chicago School" / monetarist thought, Milton Friedman's "Capitalism & Freedom" is a good primer.
For a more scholarly view, "Money, Markets, and Sovereignty" is a great one for global-economic thought at the most macro level, and "Financial Innovation" (Molyneux) is awesome for showing where all of this came from - though only the first three chapters are accessible for someone who isn't comfortable with math.
Given that the neo-Keynesians are abjectly failing again (last time was the stagflation of the '70s) and that much of the world is now acknowledging this after trying 3 or so years of their snake oil remedies (e.g. note the recent G8/G20 fireworks, and it's been two decades for the Japanese), recommending that anyone read them as more than historical curiosities---important ones, I grant you---strikes me as fatuous.
(ADDED: OK, they're relevant today because they provide a convenient excuse for politicians to do something the latter love, to spend lots of money to get re-elected (see second paragraph of http://news.ycombinator.com/item?id=1465384 or any of the Great Depression histories that break out where the New Deal money was actually spent (three guesses)) ... but then again, does a beginner need to know anything more than that they offer an excuse for borrowing lots of money to then spend?
OK, yes, there's a bit more: the US Stimulus bill isn't even proper neo-Keynesian economics because of how slowly it's being spent and where much of the money is going; the multiplier is almost certainly negative. That does help in understanding how we got to today's situation. But I'm pretty sure if you read very much Austrian economics this will be covered.)
The Austrians are still making sense in our "modern" situation (is it really very much more modern than when they developed it in the last century???) and are still worth reading and even potentially adopting as the school you'll follow.
Studying the Chicago/monetarist school is important, although I would put them second after the Austrians.
