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A Monetary History of the United States, 1867-1960 10.2.1971 Edition
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Austrian Business Cycle Theory had argued that the Great Depression was caused by excessively loose monetary policy that fed an unsustainable economic boom during the 1920s, which eventually collapsed into depression. Friedman and Schwartz argued that instead it was excessively tight monetary policy following the boom of the 1920s that turned a run-of-the-mill recession into a depression. (For the Austrian explanation of the Great Depression, see Sir Lionel Robbins' The Great Depression or Murray Rothbard's America's Great Depression.)
Keynesianism argued that the Great Depression had been caused by insufficient consumer product demand and lack of investor confidence, and that government should compensate for this by increasing its spending and financing it with government debt. Friedman and Schwartz argued instead that the problem and solution were not so much a matter of fiscal policy as they were a matter of monetary policy. Government, particularly the monetary authorities, was the cause of the depression, not the solution. Stimulative fiscal policy as prescribed by Keynes would in the long run not lead to an increase in economic growth and employment, but only to an increase in inflation. (For the Keynesian explanation of the Great Depression, see John M. Keynes's The General Theory of Employment, Interest and Money or John Kenneth Galbraith's The Great Crash, 1929.Read more ›
The most important part of this book is the section on the Great Contraction. Federal Reserve policy did contract the money supply by 1/3 during the early years of the depression. The Federal Reserve did revive the depression by increasing reserve requirements in 1937. The collapse of the banking system collapsed the real economy. The recovery of the banking system was important to the recovery of industry. Money matters.
The style of this book is excellent. Considering the sophistication of its subject matter, it is highly readable. It gets into both statistics and relevant written history. It also has a helpful appendix on the determinants of the money supply.
There are some problems with this book. Money is not all that matters. Government policies that prevented wage deflation contributed greatly to the Great Depression. Of course, this book was meant to focus on monetary history alone, as the title implies. But, readers must keep the limitations of such a narrow focus in mind when considering the explanatory power of this book. Its' authors also have too little appreciation for private banking systems (Friedman latter embraced free banking). Despite its' limitations, this book is important as a empirical source for understanding how money matters to economic conditions.
Most Recent Customer Reviews
Parts of this are quite dense, even for someone like me with some background in econ. That being stated, monetary policy is not something that lends itself to one-liners for memes... Read morePublished 16 months ago by Ryan Adler
This book (and Golden Fetters) are two seminal works that, had they been read by the top economists in the nation when the Too Big to Fail catastrophe hit, might have found ways to... Read morePublished 22 months ago by Rex Dart, Eskimo Spy
For the few individuals who desire a better understanding of monetary policy history of the US this is a valuable reference tool.Published 23 months ago by Charles Crum
Great resource with excellent details on cause and effect monetary policy. If only our politicians were required to read this.Published on May 10, 2013 by Matthew Brown
Can't beat the master of what really works and what doesn't work, i.e. Keynesian theory. Free markets and capitalism work and are the only system that has helped improve the... Read morePublished on March 27, 2013 by Millard Stiles
I have just started reading the book (the kindle version). Many of the images are missing "due to rights". Please consider this before buying the kindle version.Published on March 24, 2012 by michael carey
"He who refuses to learn history is condemned to repeat it". Milton Friedman gives an easy to read version of History for the period 1867-1960. Read morePublished on March 2, 2012 by Kenneth F. Cotter
Milton Friedman (1912-2006) was an American economist who taught at the University of Chicago (and was the leader of the "Chicago school"); he received the Nobel Prize in Economics... Read morePublished on February 16, 2012 by Steven H Propp
It is pretty obvious that economics is, in fact, *not* a science, otherwise we would see hundreds of reviews of this ground-breaking book. Read morePublished on February 5, 2012 by Chris Mathews