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Mark Atwood
RIP, Milton Friedman
I was reading Milton Friedman's entry in Wikipedia, and came across what is probably the most straightforward, honest, and to-the-point description and admission of the cause of the Great Depression, ever.

Or, as a representative of the Federal Reserve (one Ben Bernanke) pithily expressed it on the occasion of Friedman's 90th birthday in 2002: Regarding the Great Depression. You're right, we did it. We're very sorry.

So much for the theory of it being a result of the "fundamental contradictions of capitalism". The Great Depression wasn't caused by an uncontrolled economy. It was caused by the one-two punch of slamming down protectionist tariffs, and by trying to use the central bank to "plan" and "control" the economy. Which is very foreboding, given the recent election of a lot of pols in the US who are all for protectionist-ism and economic planning. "It failed miserably before, let's TRY IT AGAIN!"

Goodbye, Professor Friedman. You will be missed.
7 comments or Leave a comment
rhonan From: rhonan Date: November 16th, 2006 11:11 pm (UTC) (Link)
Just because something is a poison in large doses does not mean that it is not a life-saving medicine in much smaller doses. Then again, my biggest complaint with the Federal Reserve is that it is a private bank and not just a branch of the Treasury Department.
zsero From: zsero Date: November 17th, 2006 12:10 am (UTC) (Link)
The Fed is a private bank only in name. Its governors are appointed by the President and confirmed by the Senate, and all the profits it makes go to the Treasury.

It has "shares", but they cannot be traded; each "shareholder" is compelled by law to buy exactly so many "shares" from the bank, or to sell so many back to the bank, at a fixed price. A "shareholder" may not hold more or fewer "shares" than that, it can't do anything with them while it holds them, and it receives a fixed percentage as a "dividend". In other words, these are not really shares at all, but compulsory loans, paying a fixed rate of interest, regardless of the market rate.
fallenpegasus From: fallenpegasus Date: November 17th, 2006 12:20 am (UTC) (Link)
It's a "private bank" the way the BBC, PBS, or the USPS are "private corporations". In fact, those 3 are more like "private corporations" than the FR is.

The FR's governors are appointed by the POTUS and the Congress. They report to them, not to the "stockholders", who have no power of any sort over the FR. The FR is routinely audited (despite the loony claims to the contrary from both the moonbat left and from the loony right). Any profit the FR makes gets immediately given to the US Treasury.

"Private" my ass.

If it was "just a branch of the Treasury Department", there would be unbearable political pressure to do something really utterly stupid during a recession, like say, try to inflate it away. That's an extremely unwise idea.

What sorts of things do you think the central bank should do, that it hasn't done? Or what do you think that it has done, that you think that it shouldn't have?
fallenpegasus From: fallenpegasus Date: November 17th, 2006 12:25 am (UTC) (Link)
And some things, like lead and mercury, are poisons, not matter what the dose.

Protectionism and economic planning are poisons, no matter what the dose.

I repeat my recent quotation:

I should instead describe protectionists by using their favorite euphemism: "fair traders."
if ordinary people are served by being "protected" from globalization, then they can be made even better off by being protected from countryization - and better off still by being protected from townization and neighborhoodization. Protectionist quackery implies that we achieve maximum prosperity when no one consumes anything produced by anyone else.
wendolen From: wendolen Date: November 16th, 2006 11:41 pm (UTC) (Link)
What about all the panics in the laissez-faire years?
fallenpegasus From: fallenpegasus Date: November 17th, 2006 12:14 am (UTC) (Link)
We still have them. It's called the "business cycle". The structual stuff we have in place now that moderate them has little to nothing to do with the central bank.

That is, in fact, the current mission of the Federal Reserve, and it can be worked out by parsing out their intentionally obscure utterances and looking at their actions.

They give all the people who dont know any better, or who are full of wishful thinking, the impression that "someone is in charge of these things", which helps keep them calm. But in reality, they know they can't do very much, and anything they can do never helps. So they mostly sit and do nothing, and occationally give little tiny tweaks to the reserve rate, just so people think something is happening.
alacrity From: alacrity Date: November 17th, 2006 07:03 am (UTC) (Link)
Anything they can do never lasts permanently, but they can most certainly create short term effects... which tends to reult in a slight long-term inverse reaction.

Money supply theory is sooo cool. :)
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