I turned off the recession bars this time, as they are not entirely relevant.
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| Graph #1: Rate of Base Money Growth, 2000-2009 |
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| Graph #2: Rate of Base Money Growth, 1920-1932 |
The first graph shows in red the early years of Ben Bernanke's Chairmanship of the Federal Reserve. Looks to me like he was just going with the plan Alan Greenspan established before he retired. But some people say it was Bernanke's policy that created the Great Recession.
The second graph shows in red the years beginning with Roy A. Young's Chairmanship of the Federal Reserve. Does anyone today say it was Roy Young's policy that created the Great Depression?
Here's the big picture, so you can see where the two graphs above fit into it:
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| Graph #3: Rate of Base Money Growth, and a Repeating Decline |
2 comments:
Friedman & Schwartz's Monetary History of the Great Depression, which won them the Nobel Prize, does put much of the blame on the Fed. It seems pretty clear to me that in both cases we saw a deadly combination of deflationary demand shocks from the Fed and inflationary supply shocks from the government. Is that your view, or do you have a different view?
Of course, there were gold standard issues in the Great Depression that make the whole money supply thing very complicated. I don't understand it very completely. I think the monetary contraction was exacerbated by some crazy policy of the French central bank to buy up all the gold...
Hi Kevin. I am particularly fascinated by the similarity of the first two graphs.
Blaming "the Fed" is a lot more respectable than blaming the guy who came to bat during the second half of a long, clear trend. I suppose Bernanke's massive base-money increase could have started in his first or second year, rather than his third. But it's a weak argument, I think, to blame Bernanke for everything.
I think Congress has skewed things terribly, in favor of saving and in favor of credit use and in favor of debt accumulation. This tilting of the playing field creates all sorts of problems for Fed policy.
I think it is wrong to point a finger at the Federal Reserve, and ignore what Congress has done.
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