David Laidler on Money

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4.7 • 4.4K Ratings

🗓️ 16 September 2013

⏱️ 65 minutes

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Summary

David Laidler of the University of Western Ontario talks about money and monetary policy with EconTalk host Russ Roberts. Laidler sketches the monetarist approach to the Great Depression and the Great Recession. He defends the Federal Reserve's performance in the recent crisis against the critics. He argues that the Fed's monetary policies have not been unconventional nor impotent as some critics have suggested. The conversation closes with a discussion of the state of macroeconomics and monetary economics.

Transcript

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0:00.0	Welcome to Econ Talk, part of the Library of Economics and Liberty. I'm your host Russ Roberts
0:07.8	of Stanford University's Hoover Institution. Our website is econtalk.org or you can subscribe,
0:14.4	comment on this podcast, and find links and other information related to today's conversation.
0:19.5	We'll also find our archives where you can listen to every episode we've ever done going
0:23.3	back to 2006. Our email address is maladycontalk.org. We'd love to hear from you.
0:32.4	Today is August 26, 2013, and my guest is David Ladler of the University of Western Ontario.
0:39.9	He has written widely on monetary economics and was the research assistant for Friedman
0:44.4	and Schwartz's classic Monetary History of the United States. David, welcome to Econ Talk.
0:50.0	I'm very glad to be here. Thank you for having me. So I want to start with the great depression
0:54.6	and Friedman and Schwartz's work. They had very revolutionary views of what caused the depression
1:02.4	and the failure of the economy to recover. What did they try to teach us in that book?
1:07.8	Well, let's first remember that that book was from 1867 to 1960. It wasn't just about the great
1:15.2	depression. What they tried to teach us about the great depression specifically was that it was
1:21.4	a particularly extreme example of a pattern that you could see throughout American monetary history,
1:27.8	namely that if you allowed the rate of money growth to collapse, you were going to bring about
1:32.9	a downturn in the economy. More specifically, as far as the depression was concerned,
1:39.6	they argued that the federal reserve system turned a fairly routine downturn that started in 1929
1:48.2	into an absolute catastrophe by, first of all, failing to act to support the banking system
1:55.6	in the first year of the downturn. Then just failing to take vigorous action to get the monetary
2:03.1	system expanding again over the next two years, culminating in the bank holiday of 1933
2:10.5	and the raising of the price of gold and all the rest of it. So in a nutshell, the message was
2:16.7	the great depression that was not a sign that there was some deep flaw in the market economy,
	...

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