> Devine, James wrote:
>
> >I'd have to look again at this, but the Fed often has let the
> >discount rate follow the market -- and market rates were clearly
> >falling. According to Friedman & Schwartz, market rates may have
> >fallen more than the discount rate: "Though discount rates fell
> >absolutely [before Oct. 1930], it probably rose relative to the
> >relevant market interest rates, namely, those on short-term
> >securities with essentially zero risk of default." (_The Great
> >Contraction_, p. 45.)
Doug:
> Of course, Friedman wants to blame the depression on the Fed, since
> it couldn't have been the result of anything intrinsic to capitalism.
> It had to be bad state policy - stupid Fed and Smoot-Hawley.
The quote makes sense in the limited context, since the volume of discount loans didn't increase much.
It's the larger-scale discussion where MF falls apart. His position is that if he'd been in charge, everthing would have worked out fine.
JD
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