Milton Friedman: the Gold Standard Caused the Great Depression ?

Milton Friedman, most respected free market economist in modern history, made it clear that money supply needs to expand with a growing economy, or else you have "corrections" every few years, called depressions.

The US suffered a series of depressions every few years, for over a century, while on the gold standard. This ended when it LEFT the gold standard.

In this video, Friedman explains how failure to expand the dollar, on the gold standard, helped cause and continue the Great Depression.

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[patbarkley]

@AustroLibertarian89 "the monetary policy of the Federal Reserve whereby they intentionally caused deflation to counteract the inflation caused by the banks"

Wrong. Bank failures caused the money supply to shrink. The Fed should have counteracted the shrinkage, but they did not.

[patbarkley]

@AustroLibertarian89 "We were NOT adhering to the gold standard (that's the problem). If we had been, neither inflation nor deflation would have been a problem"

You feel there was no inflation or deflation under a gold standard?

[cyoungso]

@mikeswanon8989 from his "free to choose" series on PBS in 1979. on youtube or torrents.

[mikeswanon8989]

Does anyone know what video this is from or what year it is?

[aaaaaaaaaa8920]

End fractional banking! I give the bank $1 it can lend $1 not $9!

[bondurango]

@Porojukaha

"Had the fed simply lent out money fractionally on the gold it had in its coffers there would have been no depression."

If you're going to do fractional banking, what difference does it make? You think gold has a limit on being divided? Truth is, fractional banking renders the gold standard as a farce.

Furthermore, gold is subject to hoarding & artificial scarcity. It's value is unstable. Gold is not a substitute nor is it needed to set enforceable laws.

[Porojukaha]

yeah the gold standard was a good thing because it shackled government. It kept them from spending TONS of money. Had the fed simply lent out money fractionally on the gold it had in its coffers there would have been no depression. Actually, previous to that, had they not allowed the money supply to decline in the first place. Which is not deflation as deflation isnt necessarily bad, and relates to prices, not the quantity of money. Had they not allowed that there would have been no depression

[AustroLibertarian89]

Sorry....but I think you misunderstand the issue. Friedman was not blaming the gold standard for the depression, but the banks! The banks lend your money out when you put it into your account, without taking the money out of your account. (Fractional-reserve banking) Thus, your money is lent to someone else and deposited in theirs, while still remaining in your account.

[AustroLibertarian89]

This causes the total monetary supply to increase, thereby producing inflation and lowering the value of ever dollar in existence. The great depression was caused primarily by the banks that criminally caused inflation and, as Milton Friedman, F. A. Hayek, and Ben Bernanke (the chairman of the Federal Reserve) have said, by the monetary policy of the Federal Reserve whereby they intentionally caused deflation to counteract the inflation caused by the banks. This is what caused the depression!

[AustroLibertarian89]

Those two things (fractional-reserve banking and the Fed) are also the cause of the current economic recession. It was not the gold standard that caused the depression, but the lack of one! We were NOT adhering to the gold standard (that's the problem). If we had been, neither inflation nor deflation would have been a problem and the depression wouldn't have happened. And again, today we are falling into similar dangers because of a lack of adherence to the gold standard.