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Milton Friedman Would Have Welcomed the Fed's Intervention in Bear Stearns

Brad Delong you are absolutely correct. Milton Friedman would have rescued Bear Sterns. But Friedman authored only a superficial explanation, and an incomplete proposal, for preventing the Great Depression. The Federal Reserve was not yet set up to help.

Milton Friedman was not a monetarist. In fact his knowledge of money & central banking was cursory. And Milton was loath to grant central bankers much discretion in formulating and executing monetary policy.

“Friedman's calls, at times, for extremely strict banking regulation: 100% reserve banking,” in fact. Did Friedman really say that? I find that statement unbelievable. That of course would turn the member depository institutions into financial intermediaries, intermediaries between savers and borrowers. I.e., like investments banks, which are financial intermediaries.

In contrast, MCBs are money and credit creators. I.e., every time a member commercial bank makes a loan to or buys securities from the non-bank public it creates new money.

And those graphs, Milton Friedman didn’t know what our means-of-payment money was.

And the “deposit-currency ratio”. You’d better double back and check your stats. …well you’ll find out.