NACBA
Member
- Joined
- Jan 19, 2010
- Messages
- 784
The financial crisis fundamentally changed the nature of central banking.
Before he became chair of the Federal Reserve, Ben Bernanke agreed with the free market economist Milton Friedman that central bank policy played a key role in making the Great Depression the most severe in U.S. history. But the two parted ways on the reason why. And that disagreement goes a long way toward explaining why the financial crisis of 2007-2009 has brought not just a dramatic increase in the powers and activities of the Federal Reserve but a fundamental transformation of its role within the economy.
Friedman viewed banking panics as monetary shocks, in which the checking accounts and other deposits at failing banks wink out of existence, causing a sudden fall in the total money supply. In contrast, Bernanke treats panics as shocks to the flow of savings, causing the failure of firms whose continued existence is crucial for the allocation of credit. Such disparate diagnoses dictate significantly different cures.
http://reason.com/archives/2014/11/20/how-the-fed-got-huge
Before he became chair of the Federal Reserve, Ben Bernanke agreed with the free market economist Milton Friedman that central bank policy played a key role in making the Great Depression the most severe in U.S. history. But the two parted ways on the reason why. And that disagreement goes a long way toward explaining why the financial crisis of 2007-2009 has brought not just a dramatic increase in the powers and activities of the Federal Reserve but a fundamental transformation of its role within the economy.
Friedman viewed banking panics as monetary shocks, in which the checking accounts and other deposits at failing banks wink out of existence, causing a sudden fall in the total money supply. In contrast, Bernanke treats panics as shocks to the flow of savings, causing the failure of firms whose continued existence is crucial for the allocation of credit. Such disparate diagnoses dictate significantly different cures.
http://reason.com/archives/2014/11/20/how-the-fed-got-huge
