To: Freedom4US
Friedman’s answer to this was that the Fed should have, in essence, told the people, “You want your cash? Come and get it!” while injecting massive liquidation into the system to react to the want of the people. It would have been in this manner that those who panicked would have suffered the most through an erosion of purchasing power. And those who left their deposits in the bank would have received a rate bump for their wisdom. When the people felt what was happening to the dollar, the banking runs would have come to a halt that much faster and VOLUNTARILY!
52 posted on
11/20/2007 1:34:11 PM PST by
LowCountryJoe
(I'm a Paleo-liberal: I believe in freedom; am socially independent and a borderline fiscal anarchist)
To: LowCountryJoe
Friedmans answer to this was that the Fed should have, in essence, told the people, You want your cash? Come and get it! while injecting massive liquidation into the system to react to the want of the people.
The problem in those days, the US was statutorily on a more or less full gold-coin standard. So, any cash injections would have met with massive redemption, which had already broke the system. When FDR said "the only thing we have to fear, is fear itself", he wasn't kidding! It was a bad, bad time. Maybe Treasury could have printed up enough cash to meet depositor demand but there wasn't enough gold, which is what depositors wanted anyway. A lot of the "smart money" knew one way or another what was coming and sent their money out of the country as well.
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