Friday, October 30, 2009
Printing money will save us all, apparently
The Fed has expanded what economists call base money. But the so-called money multiplier, which is a function of bank lending, remains constrained. Today's bold monetary policies are Friedman's invention. That the Fed can always create fresh liquid funds â€“ and should do so liberally in an emergency â€“ was his revelation. Money from helicopters is Bernanke's modern encapsulation. The forces of depression and deflation can be combated by policymakers, and the world has learned from the 1930s. A second Depression should be avoided.