Startling historic graph from the St. Louis Fed, the money supply.
From Peter Robinson at The Corner, who starts a worthwhile discussion of monetary policy.
Anti-deflationary? Or casting bread upon the waters? Honestly don’t know.
Mark Steyn is trenchant, saying:
Trying to reverse an old-time “credit crunch” is one thing. But trying to restore systems in which an insanely inflated gain on assets is a permanent feature of life is a fool’s errand – I’m thinking not just of the global finance markets but also of more localized phenomena, such as the English property racket.
The economist Bruce Bartlett, meanwhile, considers what Milton Friedman might say and thinks it’s ensure liquidity, above all.
His Monetary History of the United States proved that a shrinkage of the money supply was at the core of the Great Depression and that the Fed failed the country by not increasing the money supply. I believe we are in a similar situation. The problem has been a sharp decline in velocity—the ratio of the money supply to GDP—which has economic effects identical to those that would result from a decline in the money supply. When velocity falls, GDP will fall unless the money supply increases enough the maintain GDP at the reduced level of velocity.
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