Tuesday, March 25, 2008

The Sky Is Falling! The Sky Is Falling!

A Monetary History Of The Economic Diluvian

Past Lessons - Information Is Power

Milton Friedman, right-wing think-tank and one of the greatest economists of our time, expressed his views on lessons of the Great Depression:

"... the lesson that the public at large learned from the Great Depression was that it was the result of a failure of business, a failure of capitalism,... and that in order to be safe in the future they would have to rely much more heavily on government. That was the lesson that was in fact learned from the Depression.... [I]n my opinion, the lesson that should have been learned, the right lesson, was that government let them down.
That it was mismanagement of the monetary system that produced it and not a failure of the market system."*1

*1 In Randall E. Parker (ed.), Reflections on the Great Depression (Cheltenham, U.K.: Edward Elgar, 2002), 50-51.

"Friedman says, "If the Federal Reserve System in 1929 to 1933 had been publishing statistics on the quantity of money, I don`t believe that the Great Depression could have taken the course it did."*2 Information is power."*3

*2 Milton Friedman and Walter W. Heller, Monetary vs. Fiscal Policy: A Dialogue, W.W. Norton & Company, Inc. (1969), pp. 79-80.
*3 Milton Friedman - A Biography by Lanny Ebenstein p.117.

"the [Great] Depression was primarily the result of inappropriate monetary policy that allowed the money supply to contract." *4

*4 Milton Friedman, author (with Anna Schwartz) of A Monetary History of the United States, 1867-1960 (800 page volume published in 1963), as quoted in Chapter 13, Milton Friedman - A Biography by Lanny Ebenstein p.113.

" "Full employment" and "economic growth" have in the past few decades become primary excuses for widening the extent of government intervention in economic affairs. A private free-enterprise economy, it is said, is inherently unstable. Left to itself, it will produce recurrent cycles of boom and bust.*5 The government must therefore step in to keep things on an even keel. These arguments... were a major element giving rise to the New Deal... The Great Depression..., far from being a sign of the inherent instability of the private enterprise system, is a testament to how much harm can be done by mistakes on the part of a few men when they wield vast power over the monetary system."*6

*5 - In my opinion, these are the correct side-effects of a private free-eterprise economy left to itself, to explore this view in more detail please read:
http://www.telekommunisten.net/WhatIsVentureCommunism , however Milton Friedman makes correct conclusions about the fatality of centralised control of the monetary system, by the likes of the Federal Reserve Bank, which is neither Federal (it is private) nor does it has any Reserves, not it is a Bank, or the government in its current form. One must note that the monetary system we have today was always in the private ownership and control.

*6 - Milton Friedman Capitalism and Freedom, 1962, 37, 50.

"ignorance about the power of monetary policy is that the Fed did not publish money supply figures until Friedman and Schwartz developed*7 M1 [currency plus demand deposits] and M2 [M1 plus time deposits] aggregates.*8

*7- in the book by Milton Friedman and Anna Jacobs Schwartz: A Monetary History of the United States, 1867-1960 (800 page volume published in 1963 for The National Bureau of Economic Research.)

*8 - Mark Skousen, Vienna and Chicago: Friends or Foes? (Washington, D.C.: Capital Press, 2005).

recommended reading:

----previous posts----
17 March 2008 06:35 PM EST - Montreal
Boy, I was so dead on about the below prediction of the economic perdition! The recession is here it seams to visit us for a while. I should have invested more in gold, and I would`ve if I could`ve. oh vell, c'est la vie.

18 Dec 2006 03:44 PM EST - Toronto
According to my intelligence reports the crucial finnancial information about the ammount of currency in circulation and being printed in the economy, known as M3 stats, is no longer being reported by the means of mass media as of about five months ago, making it very difficult to determine an accurate estimate on the state of the economy. In light of recentlly falling us dollar against euro by 30% and reports of high level US visit to China go nowhere and insider stocks rumored to trade at 60 to 1 ratio (that means 60 orders to sell and only 1 to buy), it is, thus, very possible that an economic crash of biblical proportions is looming over the world like an immanent extinction by a huge asteroid. Hip Hip Hooray!

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