Posted on 12/28/2019 9:51:07 PM PST by samtheman
I wish I knew when and where this speech took place. The Date Published Jul 31, 2012 is the data it was posted on YouTube.
The purpose of my posting this on the eve of 2020 (the start of the new Roaring 20s) is to highlight Friedman's thoughts on the cause of the Great Depression (which ended the last Roaring 20s).
(Excerpt) Read more at youtube.com ...
I screwed up the link.
Another attempt:
https://www.youtube.com/watch?v=xNc-xhH8kkk&feature=youtu.be
It says Utah State University in the first 20 seconds of the video.
13 October 1977
At 15:30 Friedman is referring to the book that he and Anna Schwartz wrote, “A Monetary History of the United States”.
It has a long chapter that is sometimes published as “The Great Contraction”, where they discuss the collapse of the American banking system and the American money supply from 1930-1933.
Friedman and Schwartz’ conclusion in their book is that the 1930s Fed failed to act. The Fed didn’t support or bail out banks that were being subjected to panics, and a cascade of bank failures resulted where 1/3 of American banks collapsed along with 1/3 of the US money supply evaporating.
Their recipe was that a cascading collapse has to be stopped by the Fed acting pro-actively through buying assets from banks in order to give them the liquidity to survive bank runs.
Bernanke was a student of Friedman & Schwartz and he implemented their policy in the 2008 economic crisis to prevent a deflation like the 1930s from recurring. That’s what TARP and Quantitative Easing were about.
Friedman writes that the greatest piece of legislation to come out of the Great Depression was the FDIC. In the ‘30s when a bank failed, the depositors were ruined. Their deposits were wiped out, that’s why the money supply contracted by 30%. If we had experienced another deflation in 2008 the FDIC would at least have protected depositors to some degree.
Thanks.
Free to Choose has a chapter on the Depression if I recall correctly. Both the video Series and the book.
Cognitive dissonance and the Dunning Kruger effect in action.
https://m.youtube.com/watch?v=GJz66wm95-M
JoMa
The 2008 financial crisis was caused by a ridiculous real-estate bubble, supported by incredibly sloppy mortgage collateralized bond ratings and overleveraged banks. Hellen Keller could have seen it coming.
“Cognitive dissonance and the Dunning Kruger effect in action.”
I discovered this while interviewing for an administrative assistant position where a certain level of knowledge of Excel was required. Many applicants greatly exaggerated their competence; not intentionally, but because they had no idea what the program was capable of. We actually tested them and most were surprised when they scored a basic level. They simply didn’t know, and didn’t know what they didn’t know.
I thought another example of this was when Rumsfeld, during the Iraq war, said in a press conference that there were “known knowns, known unknowns, and unknown unknowns”. The press had a field day talking about how stupid that statement was, without realizing that they were just too stupid to understand it.
“A great part of the problem with a panic is that it creates a liquidity crisis, like in the movie, It’s a Wonderful Life.....When all the banks need to liquidate a substantial part of their assets all at once, there is no market for the assets.”
That’s exactly right. And that’s what was happening from 1930-1933.
The members of the 1930’s Fed couldn’t come to an agreement on what they should do so they did nothing. You basically had no Fed.
They should have purchased illiquid assets from banks under pressure to give them cash in order to survive bank runs. This could have interrupted the domino effect of “disintermediation” and cascading bank failures.
It’s easy enough to see in hindsight. Not enough of the member banks thought it was Fed’s proper job back then. Toss in the absence of an FDIC to protect small depositors and you had the recipe for disaster. A tough lesson to learn from.
So Milton Freidman was basically a Banking Socialist.
Socialize the loser.
“So Milton Freidman was basically a Banking Socialist.”
And what exactly makes Friedman “a Banking Socialist”? Is that term of art your invention?
Since Banks will not do their fiduciary job, the people must hold their gold. This is twisted. Banks are corrupt buildings of phony concrete.
Government never solves problems, they merely shift and distract.
All banks should be mandated to keep 100% gold reserves.
Exchanges should be immediate and tax free.
There would be no bank failures, ever.
The original problem was never remedied.
The State and the people should be able to test their banks by requesting their deposit total as gold coin.
Any deficient bank should be shut down.
The burden of solvency then is the customer must store his own gold.
Then WHAT THE HELL IS A BANK VAULT USED FOR ANYWAY ??
, if the vault cannot store gold?
And yes we understand Freidman’s solution of a FDIC.
The FDIC is a bandaid.
Freidman had a few brainfarts, and Socialist Bailouts is a fart.
“No the root cause of the Great Contraction is allowing Banks to sell the lie that less than 100% of gold reserves is safe.”
Von Mises in his 1912 ‘The Theory of Money and Credit’ writes that the fundamental business of banks is the creation of ‘Credit’, ‘Credit money’, ‘Bank money’ which by definition isn’t backed by gold.
Only ‘Money’ itself is gold or gold backed.
And a large portion of what an economy uses is what Von Mises called the ‘money substitutes’ of Credit, Credit Money, Bank Money. In the era before American banks tobacco money was another such money substitute.
The system of 100% gold reserves that you advocate would put banking itself out of business. Creating credit money is their reason for being. A 100% gold reserve system is a fantasy that has never existed.
“All banks take in value money and return zero, a paper slip receipt. They are frauds.”
Well there it is. You want to outlaw banks.
“All banks should be mandated to keep 100% gold reserves.”
The resulting currency police would be kept busy jailing outlaws who skirt your 100% gold transaction edict.
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