I don’t get it. Help welcome!
In their 1963 book “A Monetary History of the United States, 1867-1960″, Milton Friedman and Anna Schwartz [explained the Great Depression as follows:] After the Depression, the primary explanations of it tended to ignore the importance of money. However, in the monetarist view, the Depression was “in fact a tragic testimonial to the importance of monetary forces. In their view, the failure of the Federal Reserve to deal with the Depression was not a sign that monetary policy was impotent, but that the Federal Reserve exercised the wrong policies. They did not claim the Fed caused the depression, only that it failed to use policies that might have stopped a recession from turning into a depression.
http://en.wikipedia.org/wiki/Causes_of_the_Great_Depression
IMO the cause of all this is Richard Nixon’s decision to break with Breton Woods in 1971, which allowed “the Chicago boys” to invade the policy vacuum, and lo, “free market capitalism” started a boom in the 80′s which led to the bust of the 90′s the tech bubble, another bust, and finally, this.
John Doh, London, UK (1)
The Friedman-Schwartz hypothesis seems to be the hypothesis that a more accommodative monetary policy could have greatly reduced the severity of the Great Depression. (2)
Anna Jacobson Schwartz is most famous for her collaboration with Milton Friedman on A Monetary History of the United States, 1867-1960 which hypothesized that changes in monetary policy have large effects on the economy. In particular, they lay a large portion of the blame for the Great Depression at the door of the Federal Reserve. (3)
Ambrose Evans-Pritchard says today in The Sunday Telegraph:
Tim Congdon – a hard-money Friedmanite from International Monetary Research – says the Fed is still not easing enough,
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Personally, I backed the Brown fiscal package last autumn, but only to buy time when Western banks seized up, and to pressure G20 surplus states to play their part. That phase has passed.
Today’s danger is creditor revulsion as governments worldwide raise $6 trillion in debt this year. The solution is remarkably simple. Stop borrowing and step up the Friedman monetary blitz to stop loan collapse. Does any nation have the nerve to do it? (4)
In her introduction to “The Essence of Friedman”, (Hoover UP, 1987, Kurt R. Leube, ed.), Anna Schwartz writes p. xxii that the Keynesian doctrine assigned a negligible role to money and that Friedman’s theory was a counterrevolution to Keynes’s revolution.
Money matters? Yes, Truth matters also.
Milton and Rose Friedman, “Free to Choose”. Harcourt Brace Jovanovich, 1980, p. 88
Had the Federal System followed the rules of the gold standard, it should have reacted to the inflow of gold by increasing the quantity of money. Instead it actually led the quantity of money decline
I don’t get it. Help welcome!
Ivo Cerckel
honestmoney@maktoob.com
NOTES
(1)
REACTION UNDER
From The Times
June 15, 2009
G8 signals the end of the financial crisis, but what caused it
Anatole Kaletsky
http://business.timesonline.co.uk/tol/business/economics/article6499355.ece
(2)
http://econpapers.repec.org/paper/nbrnberwo/10255.htm
(3)
http://en.wikipedia.org/wiki/Anna_Schwartz
(4)
Don’t believe the hyperinflation hype – dare to make cuts
London asset managers 36 South are launching a “hyperinflation fund” for those convinced that money-printing by central banks around the world must lead to Weimar or Zimbabwe soon enough.
By Ambrose Evans-Pritchard
Published: 7:19PM BST 20 Jun 2009
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/5586043/Dont-believe-the-hyperinflation-hype—dare-to-make-cuts.html