Quote:
Originally Posted by ribosoma
The burden of proof regarding your interpretation of the Bernanke quote lies on you. It wasn't a discussion between Friedman and Bernanke, it was a speech given by Bernanke alone. If you choose to bend the context to fit your worldview, that's fine, but it's conjecture, and therefore not worthy of any serious discussion.
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Milton Friedman was teh founder of the monetarist school of economics. In one of his seminal papers (written with his eventual wife) he proposed that the major cause of the Great Depression (the 1930s one) was a failure of the central banks of the time to have an appropriate monetary response to the original shock to the economy (the stock market crash and subsequent bank pressures). The money authorities at the time were very worried about the health of the banks, and about widespread bank failures, and their response was to increase the reserve requirements imposed on banks. This had the effect of severely cutting back money supply, just as the economy was contracting, ---leading to the the economy contracting even more, and for an expanded period of time---- voila, recession becomes great depression.
Bernanke was tipping his hat to that seminal paper. Every single economist in the country reecognized this fact... it is entirely uncontroversial. (Bernanke did not take the next ste and agree with Uncle Milty and the monetarists that Monetary Policy failures were the root cause of all economic fluctuations)