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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Freedom Fighter who wrote (60564)	5/25/1999 11:42:00 AM
From: Mike M2	Read Replies (1) \| Respond to of 132070

Wayne, The Austrian economists take issue with the monetarist focus on money supply growth because it is too narrow. It does not capture the growth of credit created outside the banking system. Friedman's observation that the money stock grew 4% per year roughly in line with growth of GDP is correct but it ignores the fact that the main source of money and credit creation was the securities markets. during the 3 years 1927-9 $30 billion of new issues came to market and bank and broker loans amounted to $6-7 billion. During these years GDP grew from $90 to $98 billion. It is clear that money and credit creation was vastly in excess of GDP growth so it fueled speculation in the financial markets. In the April issue of the Richebacher Letter he notes " Friedman and the monetarists conveniently overlook the fact that the money stock did not decline significantly until March 1931, after the economy had already plunged into deep depression. What the country had been struggling with appeared to be , not a shortage of money, but plunging capital values in financial and real assets and a general loss of confidence in banks and business prospects. " Richebacher also notes that prior to Friedmans book the prevailing view was that the Great Depression was the inevitable aftermath of the prior bubble excesses, against which the Fed's drastic easing was powerless." Richebacher Letter 1217 St. Paul St. Baltimore , MD 21202 Mike