#10: MILTON FRIEDMAN'S BIG MISTAKE

In this video segment Mr. Fed describes the historic rise to prominence of the Kansas City Branch of the Federal Reserve due to the failure of Milton Friedman's work to accurately predict the consequences of banking deregulation. The most prominent Kansas City exponent of this rebuttal to Friedman was Wayne Angell who became Vice Chairman of the FOMC under Paul Volcker.




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[mikeyooh7]

What do you think about this current fed annoucement to buy up some 300 billion in treasuries, and 750 billion in buying securities. This is the first time I have really thought high inflation (Not hyper) was possible after this announcement. And i think the markets also thought it was possible with the dramatic gains of the euro on the dollar, and gains of a variety of commodities.

[Crashof2008]

Please see very recent discussion, including my post in one hour, on my Mr. Fed youtube home channel page...

[rarelibra]

You mean the Great Depression of 1929?

[KhanSlayer]

What influence do you think "Trickle down" economics had on the improvements experienced during the Reagan Era? Was it substantial or was it all really the effect of Volcker reinflating the economy after he curtailed excessive inflation and the recession ended. I hear alot about upperbracket tax cuts and also Volcker and would like to understand who really saved the economy.

[EnergySupply2008]

Rarely have I seen anyone as smart as Crashof2008. Very impressive.

[Crashof2008]

The bigger the risk of complete liquidation of the world's financial system (with subsequent asset deflation) that you foresee, the greater the classes of bonds that will default.

If you foresee an extreme deflation, you need to find extremely safe bonds. In a flight to safety, such bonds will (and are) appreciating greatly in value, as well as the income stream.

During the Great Deflation of 1929-1932, buying US governments on margin was an extraordinarily profitable trade.

Mr. Fed

[blackiswhite1111]

Any bond recommendations, or good off site resources on the topic?

[Crashof2008]

Exactly. Gold CANNOT simultaneously be a hedge against BOTH inflation and deflation.

The best hedge against hyperdeflation is the highest quality bonds you can find, according to Henry Kaufman, former head of Salomon.

And gold is crashing and Treasuries continue to soar...

[blackiswhite1111]

He's talking about hyperdeflation, which would make the price of gold plummet.

[Crashof2008]

I understand you are confused. That is why I am trying to keep you focused on your most fundamental of errors, albeit typical of US residents.

I refer you to Financial Times of London to bursh up on the basics, especially the daily writings of Krishna Guha.

Please answer yes or no. Did Japan experience a nasty bout of deflation in the 1990s?

Please answer that one question, yes or no.

Mr. Fed