Reddit Reddit reviews A Monetary History of the United States, 1867-1960

We found 16 Reddit comments about A Monetary History of the United States, 1867-1960. Here are the top ones, ranked by their Reddit score.

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A Monetary History of the United States, 1867-1960
Princeton University Press
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16 Reddit comments about A Monetary History of the United States, 1867-1960:

u/HealthcareEconomist3 · 9 pointsr/AskSocialScience

I haven't read any of his books but I have read many of his op-eds in NYT and my guilty pleasure is watching economics documentaries because they make me angry, Inequality for All is one of my favorite examples of nonsense. Generally he falls in the same trap as non-economist commentators from both sides in that he misunderstands & misrepresents economics, hold very strange views with regards to economic history and generally has a pretty significant Dunning–Kruger on the subject (or all the fields this seems to occur most frequently with economics, some of the ideas are sufficiently accessible and some pieces of data can seem meaningful when they are not) .

A short list of some significant issues I have had with him in the past;

  • He asserts that the great depression was caused by falling labor share (higher profits & lower wages) which is simply wrong, consensus almost entirely supports that which Friedman posited in Monetary History of the US; a speculative bubble cause a financial recession and tightening of monetary policy after the crash caused the depression. Also labor share actually rose significantly through the 20's.
  • He also asserts that recessions in general are caused by falling labor share, he shows a cyclic correlative effect for profits as proof of this (ignoring that its expected that profits would by cyclic) entirely ignoring that the last three (possibly five) recessions occurred during a period where labor share has been virtually unchanged. For the record the only cause of recessions is shocks, there is no magic reason why they occur or mechanism that would allow us to prevent them; we smooth the cycle with monetary policy but that's the extent of our control.
  • He uses that absurd graph showing absolute corporate profits vs hourly wages which EPI originated constantly, ignoring that its entirely excluding salaried workers, it comparing real & nominal figures and that it uses self-reported income instead of payroll (under reporting bias). There has been no divergence between productivity and income.
  • Bizarrely he seems to have a high-school level of understanding of labor economics, he doesn't understand the mechanism by which wages are set nor the mechanisms by which they rise. Similarly he also makes some pretty absurd remarks regarding the economic effects of increasing labor share (such as forcing businesses to raise wages during a recession). Similar problems with how he regards unionization as a silver bullet for an assorted list of ailments.
  • He doesn't understand the significance of credit markets in cycle management, he outright claims that the ability of businesses to access credit during recessionary periods has no effect on the severity of recessions. Many economists, myself included, would assert that monetary policy is our most important tool for managing recessions, a smaller number (also including me) would assert that its the only effective tool in advanced economies. There is a huge open question regarding the efficacy of fiscal stimulus in advanced economies, its also notable that the number of economists who believe congress could design a reasonable stimulus plan is nearly half of those who believe fiscal stimulus is useful.
  • Many of his ideas are sound when simply stated in short form but go loopy in the details. Increasing EITC would be a very good thing indeed, removing the taper not so much. Universal healthcare would be a very good thing indeed, single-payer insurance not so much. The problem with education is efficacy not resources. etc
u/[deleted] · 8 pointsr/badeconomics

Monetary policy's kind of uncharted waters for macroeconomists; it's not a big deal, so it hasn't been researched much. Pretty much the only thing I can think of is this somewhat obscure and esoteric work. It hasn't made a very big splash in the field, but it's worth a read if you're interesting in monetary economics.

u/he3-1 · 4 pointsr/badeconomics

Monetary policy, the most important tool for stabilizing prices and employment (and thus the cycle itself). See C19 or the great depression for examples of what no monetary policy or bad monetary policy looks like. This pretty much covers it.

> the biggest critique of them

I would say the absence of any form of capital (IE growth & mobility goes away) or markets to set prices (IE pretending marginalism does not real) are even more fundamental then the absence of monetary policy.

We are not capitalists. We don't have an ideological devotion to the economic system we have today, we study the emergent system of how humans interact and come up with ways to improve that. Having things like monetary policy and capital systems improves the welfare of everyone, attempting to replace reality with belief (be it collectivism or the Austrian breed of "free markets") might produce desirable outcomes when non-economists are writing about it but in reality wont.

That scarcity exists and can't simply be willed away is why collectivism does not work in reality.

u/empleadoEstatalBot · 3 pointsr/vzla
	


	


	


> # The End of Hyperinflation | AIER
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> The ongoing collapse of Venezuela’s economy has grabbed some headlines, though the lessons from Venezuela’s tragedy may have gone under-reported. To the extent the tragedy has been covered, many writers have focused on the most glaring problem Venezuela’s economy is facing: hyperinflation.
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> Tales of Venezuela’s bout with hyperinflation make for dire reading. But for students of monetary history, they give us a reason to re-examine the history of hyperinflations to see what lessons we can learn and what trends we can glean from the data.
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> In a widely cited paper, Steve Hanke and Nicholas Krus (2012) document 55 cases of hyperinflation. What stands out, particularly if we focus our attention on the timing of these events?
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> The first observation is perhaps the most obvious yet the most important: hyperinflation is unique to fiat money. No commodity-backed money has experienced hyperinflation. This is for the simple reason that the supply of a commodity-backed money cannot be manipulated, especially not for a sustained period of time, the way an unbacked paper money can.
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> Only one recorded hyperinflation occurred prior to the advent of fiat money in the 20th century: the French inflation of 1796. It should come as no surprise that France’s hyperinflation occurred only after the assignat had been stripped of its commodity backing (assignats were initially backed by the value of lands confiscated from the Catholic Church in the wake of the French Revolution). The assignat’s demise foretold the fate of dozens of later experiments with fiat money.
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> But didn’t the gold standard occasionally produce high and variable rates of inflation after the discovery of gold in the New World? Far from it. For all the bluster about the high, sustained inflation the Spanish economy endured in the 15th and 17th centuries after the discovery and pillaging of gold from the New World, the effects of this so-called price revolution are hardly discernible by modern standards. As Lawrence White (1999) notes, although inflation was high and variable by the standards of the day, the annual inflation rate in Spain over this period was less than 2 percent on average. Most modern central banks would kill for the inflation track record of the gold standard even in its darkest hour.
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> A second observation highlights a silver lining in the dark cloud that is the tragedy of Venezuela: although hyperinflation spread like wildfire in the 20th century (thanks in large part to two world wars financed by fiat money in the first half of the century and the desperate death throes of many Soviet satellite states in the latter half), it has largely gone extinct in the Western World. The only two cases of hyperinflation in the 21st century are Zimbabwe (2007) and Venezuela. And both are the results of socialist governments’ writing checks they couldn’t cash.
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> So where has all the hyperinflation gone? Has hyperinflation breathed its final breath in the Western World?
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> To answer the first question: hyperinflation has largely gone the way of the dodo for two reasons. For starters, our understanding of monetary policy and in particular what drives sustained inflation has drastically improved over the past century. This is particularly true in the wake of the monetarist counterrevolution. It’s true that economists for centuries knew that substantially high rates of inflation were driven by monetary factors. Ludwig von Mises was certainly aware of this after witnessing the German and Austrian hyperinflations firsthand. But Milton Friedman and Anna Schwartz’s (1963)work arguably did more than anything to firmly establish this idea among scholars and policy makers. It reinforced the idea (in the words of Friedman) that “inflation is always and everywhere a monetary phenomenon.” It gave it strong empirical backing, especially as later scholars built on their framework to examine nations that had more extreme histories of inflation. The tight causal connection between money and inflation might’ve been neglected or dismissed by earlier policy makers. But it can no longer be ignored or denied. And neither can the culpability of any political party or leaders who resort to the printing press as a last-ditch effort to finance their delusional spending schemes.
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> Another reason hyperinflation has largely vanished from the Western world is the simple fact that inflationary finance has universally proven to be a disaster. It’s a cure worse than the disease for any political leader who hopes to stay in power. Sure, dictators like Nicolas Maduro and Robert Mugabe might be able to maintain their stranglehold on power even amid the torrent of hyperinflation (for now at least). But as the Weimar government in Germany in the 1920s learned the hard way, no truly democratic regime can survive the disasters of hyperinflation. As it turns out, voters don’t like seeing the value of their life savings evaporate. Nor do ordinary citizens appreciate the utter economic chaos that accompanies hyperinflation. So if monetary theory isn’t enough to convince policy makers to keep their hands off the printing press, political self-interest and self-preservation likely is.
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> The answer to the question of whether we’ve seen the end of hyperinflation in the developed world is, to borrow a phrase from College Gameday icon Lee Corso, “Not so fast.” It’s true that cases of hyperinflation have lessened dramatically in recent decades. But past performance is no indicator of future results. The populist movements that gave rise to socialism in Zimbabwe and Venezuela are beginning to rear their heads in many Western nations. Many of the key pillars of the Washington Consensus have also begun to erode because of nationalist pressures. In short, while I don’t think we’ll see anything nearing very high inflation or hyperinflation in the United States anytime soon, it could happen. The mere possibility that we might completely abandon sound monetary principles is something that should motivate everyone interested in monetary economics to remain vigilant. We should not forget that Venezuela was one of the wealthiest nations in Latin America before its recent demise.
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> As the late historian and political philosopher Richard M. Weaver wisely noted: “Ideas have consequences.” Bad ideas breed misguided policies and bad outcomes. Good ideas breed prosperity. So keep up the good fight. Economics is as important today as ever before. As Mises so eloquently said with his trademark German optimism in the final sentence of Human Action, if we allow people to disregard economics, “they will not annul economics; they will stamp out society and the human race.”




u/ASniffInTheWind · 3 pointsr/explainlikeimfive

We generally consider monetary policy to have started during the 30's as prior to this the fed effectively had no idea what they were doing, prior to this there were many theories floating about regarding how you would deal with monetary policy but the new (at that point semi-fiat) currency was very much an unknown so there was no data on the most effective way of managing it.

During the 20's the stock boom had people taking out loans they couldn't afford from banks and then repaying those loans with the return from their trades, most people believed market growth would continue for ever so banks were happy to extend the credit and while the growth trend continued everyone was happy. During this period the fed has a loose monetary policy, they were encouraging further growth by increasing the size of the money supply which keeps credit rates low.

In 1929 the belief of continuous growth came to an end and now you had a large number of people who were effectively bankrupt, banks holding loans they would never see repaid and banks themselves with very significant trading losses. Immediately after this the fed adopted a tight monetary policy, they started reducing the money supply in an effort to reduce investment activity and in doing so cause credit rates to skyrocket.

Today we understand this to be the polar opposite of what should be done. During a boom you operate a tight monetary policy, you cool off growth and ensure credit rates are high to avoid debt over-extension. During a recession you operate a loose monetary policy, you keep credit rates low which encourages borrowing so people can use credit to support consumption activity.

To say the impact of these policies was profound would be an understatement. At the time the financial sector was nowhere near as integrated with other sectors as it is today so if the fed had adopted a modern policy position we would have ended up with a relatively mild recession economy wide with a deeper recession in financial services. In terms of depth and scope it would have been similar to the '91 recession. If you are interested in learning more about this aspect I strongly recommend reading this book.

Having said that their reaction was entirely understandable, if the same situation had occured in 1909 instead of 1929 (and presuming the fed existed then) the policy response would be been appropriate as we were operating under the gold standard, they would have inflated/deflated based on the business cycle which is what they were attempting to do with printing. Our understanding of what occurred here was only really established during the 60's and consensus several decades later.

> Also, if you can, could you tell me if the New Deal improved, or made worse, the Great Depression?

This is still somewhat disputed. A great deal of new research was conducted since 2007 to help understand lessons from the past more completely to help with economic management today. Current research suggests that the answer or "improved" or "worsened" would be incorrect as the effects were wildly different between states. On a country wide scale the impact was likely a small positive, some states benefited while others took additional losses due to the programs.

In any case this wouldn't be regarded as "right" or "wrong" merely inefficient. Most economists would agree that ARRA was a net positive but that doesn't mean it was well designed or efficient, in pursuing a flawed policy an opportunity was missed in ARRA to do something which would have been more helpful. The New Deal is the same way, even though it probably had a small positive impact its poor design was a missed opportunity.

We can say for certainty that certain aspects of the new deal were poorly designed. The big one was the focus on public works, economic stimulus can be better considered as investment activity; you don't want to have the government hire people to do work rather you want to pay a private business to hire people to do work as that creates the consumption ripples you are looking for (AKA multiplier). This promoted Keynes himself to write a letter to FDR regarding the New Deal and they also exchanged a great deal of private correspondence (which FDR promptly ignored).

Its also worth mentioning that the dispute here arises as the great battle between monetary and fiscal policy has yet to be resolved. Many economists believe fiscal policy (particularly considering the inability of politicians to actually listen to economists on issues of economic policy) is relatively useless for economic management purposes and instead monetary policy is the only effective way to manage a business cycle. Empirical research currently leans in that direction (particularly given the debt load and advanced economy modifiers) but not sufficiently to call the issue resolved.

u/Kelsig · 2 pointsr/neoliberal
u/durendal04 · 2 pointsr/lectures

Very well, let's begin.

Since the article doesn't make a single over-arching argument, but instead tacks on bits of misconstrued information to attack Milton and establish him as a moral obscenity and a "fascist", I'm simply going to address those bits one at a time and in order.

Some points stretch the truth, others are out right lies, none are really credible in the end.

>He has been a leading collaborator of every economic official involved in the successful tear-down of the U.S. physical economy over the last 60 years: Arthur Burns, George Shultz, Paul Volcker, and Alan Green- span. He himself stayed out of government over this period but did his dirty work all the same.

So the author is suggesting that Friedman was destroying the economy through these other economic figures? Well the author doesn't bother to back up her claims here so I can only guess what events she's referring to, but at best I'm attacking a straw-man.

> Arthur Burns

Arthur Burns was the federal reserve chairman under Richard Nixon from 1970-1978. The two important things to know about him; he was a friend and teacher of Milton Friedman, and he was also responsible for the double digit inflation that occurred in the 70's. How do the two relate? First some context. At the time there were two prevailing beliefs; the first was that monetary policy had little to do with inflation (we know that's not true); the second was that price and wage control were effective tools to combat inflation. If you ever look up any Friedman videos, most of them are about inflation because it was such a widespread misconception at the time.

Before Burns's role as the chairman, him and Friedman were collaborators. They largely held the same economic views including the idea that increasing the money supply is what leads to inflation. Because of this and their history, Friedman nominated Burns to serve as chairman under Nixon. However, once Burns became chairman, his opinion of inflation changed to favor the idea of price controls. I'm unsure what changed his mind but the result was a huge expansion of the fed in addition to some price and wage control policies. "The Federal Reserve under Burns permitted very rapid monetary growth: so rapid, in fact, that double-digit inflation emerged during the decade—twice". "The disagreement led Friedman in May 1970 to send Burns a lengthy handwritten letter critical of Burns’ statements on incomes policy. The Philadelphia Inquirer (May 29, 1970) reported that Burns was shaken by the letter, and it suggested that relations between Burns and Friedman had deteriorated. The text of the letter (actually, letters, as Friedman wrote multiple times), available in both Friedman’s and Burns’ archives"[1]

It's well documented that Friedman was quite critical of Burns's policies as chairman, so if the author is trying to suggest otherwise then she clearly did not do her homework.

[1]http://eml.berkeley.edu/~webfac/cromer/Nelson.pdf

>George Shultz

Shultz had less of a relationship to Friedman than Burns did, the only thing they have in common is that they were both academics at Chicago. However, he does relate to the inflation of the 70's. From 1972 to 1974 Shultz served as the Secretary of the Treasury, right in the middle of Nixons new economic policy. He's attributed with participating in the wage and price controls of the time, but again by 1972 it's already established that Friedman is opposed to these policies.

> Paul Volcker

Paul Volcker was another Federal reserve Chairman, serving from 1979 to 1987. I couldn't find any explicit relationship between Volcker and Friedman, but Volcker did fight the runaway inflation of the time via tight monetary policy, as Friedman had always advocated. In 1981, Volcker tightened the Fed, raising interest rates to an unseen 19%. This led to a severe recession, but by 1982 the recession was over and so was the inflation. This initiated an economic golden age for America. The S&P 500 rose at an average annual rate of 15.7% until august 2000. The nation's Gross National Product grew substantially and the U.S. economy created more than 13 million new jobs. Of course the 80's weren't perfect, there was a stock market crash in 1987 and a short recession in 1991, but I digress.

I'm unsure how the author intended to use Paul Volcker to discredit Friedman. If anything he's been vindicated by Volcker's policy.

> Alan Greenspan

The last federal reserve chairman to serve during Friedman's lifetime, he served from 1987 to 2006. In 2006 Friedman passed away at the age of 94. This is important to note because it's on record that Friedman has approved of Greenspan's policies as fed chairman, even though his policies were mostly contrary to Friedman's beliefs. Friedman advocated for a fed tight enough to stop inflation and loose enough to prevent deflation, his overall concern being price stability. Greenspan however was able to maintain price stability while also lowering interest rates, which earned him Friedman's respect. However, this exact monetary policy has been argued as the cause of housing bubble which collapsed in 2008.

Anna Shwartz, Friedman's colleague and co-author of the Nobel prize winning A Monetary History of the U.S., said "There never would have been a subprime mortgage crisis if the Fed had been alert. This is something Alan Greenspan must answer for.”

In short, Greenspan had earned Friedman's respect for operation a loose fed while also maintaining stability. However, it's clear Friedman still supported tight fed policy in his life and it's unlikely he would have the same respect for Greenspan if he lived to see the events of 2008.

> Milton Friedman loved to popularize his economic theories as "freedom to choose." But in his academic work, and among his colleagues, there was widespread recognition that his monetarist theories were nothing less than fascist.

This is the most ironic part of the article because I'm sure most readers are unfamiliar with Friedman's academic work. They probably think the author is referring to something about capitalism since free markets are what Friedman is famously associated with. However, this is not the case. In fact, it's just the opposite. For those of you unfamiliar, Friedman won a noble prize in 1976 which is largely attributed to his work A Monetary history of the United States 1867-1960 in which he comes to a famous conclusion about the great depression.

He argues that even though market speculation caused the economic downturn, it was the failure of the federal reserve to take action which lead to the great depression. The action Friedman was referring to was to have the federal reserve pump money into the economy. Now you might be thinking "Isn't that basically Keynesian economics? Isn't this guy supposed to be all about free markets? What a hypocrite!" However, if you understand Milton Friedman's opinions in general it's not hypocritical at all. For instance, Friedman was opposed to government run education but proposed a school voucher system. He was also opposed to welfare programs but proposed a negative income tax.

Friedman was famous for second best solutions. Even though he was opposed to the current policies and even though he would have favored a free market, he was willing to compromise and come up with practical alternatives that would serve as a step in the right direction. You can find other such opinions of his on healthcare, energy, and others. The same is true for the federal reserve. He has offered academic opinions and insight on the best policies for the fed to pursue but in fact he has always been in favor of abolishing the federal reserve.

This relates back to the great depression because of the nature of how the depression started. When the stock market crashed in 1929, it led to the runs on banks. "In all, 9,000 banks failed during the decade of the 30s. It's estimated that 4,000 banks failed during the one year of 1933 alone. By 1933, depositors saw $140 billion disappear through bank failures."[2] Through out the great depression, the stock of money in the United States declined by one third. Friedman argues that the supply of dollars directly ties to the value of those dollars (this is a point that even libertarian academics such as Hayek will debate against).

Despite the academic debate, the trend proves true in the 70's where Burns's expansion of the fed caused crippling inflation, and again in the 80's where Volcker's tightening of the fed restored price stability. So why was the event of the banks' closing the federal reserve's fault? Simple, it's because the government has a monopoly on the production of currency. It's not uncommon to hear libertarians argue that even currency should be left to the free market, but I digress. Friedman is simply arguing that since the fed is the only one who could reconcile changes in the money supply that the fed alone had a responsibility to stop the money supply from decreasing so sharply. Instead FDR held a "banking holiday for three days"[2] which only worsened the problem.

The ironic part about all of this is that the author is calling Friedman a fascist for basically proposing quantitative easing, a monetary policy that is usually favored by liberals.

(continued)

u/properal · 2 pointsr/Economics

I found a chart in A Monetary History of the United States, 1867-1960 by Milton Friedman and Anna J. Schwartz. Go to page 30. It shows that from1873 to 1879 real income actually steadily rose, while prices steadily declined. Friedman and Schwartz indicate that it is probably this drop in prices that has lead contemporary observers to overstate the severity of the contraction in terms of real output. They also note that severe unemployment was avoided.

u/Sabu113 · 1 pointr/IAmA

Where would you begin? There are books dedicated to demonstrate particular instances of the gold standard being miserable.

Or we could just focus on why active adjustment of monetary policy is a good thing and provide some classic case studies of inaction. Another paper comparing policy choices.

Of course this will all probably be a waste of time if we don't first have a nice sit down chat about what inflation is.

Then they'll stubbornly ignore it as they've ignored more articulate criticisms of the gold standard. Might be slightly bitter about a past post on economic policy.

[Couldn't think of a pithy comment about fiscal hawks and Europe. Also lacking a good book on the panic of 1907.Shoutout to Kindleberg's Lender of Last Resort Relevant for the End the Feddies.]

u/lib-boy · 1 pointr/CapitalismVSocialism

> ... why can't historians agree on them?

They haven't read Friedman? The Great Depression was caused by a massive monetary contraction. Friedman believed this was due to the Fed's ineptitude. Scott Sumner seems to disagree, though I've not read his book.

http://www.amazon.com/Monetary-History-United-States-1867-1960/dp/0691003548

http://www.amazon.com/The-Midas-Paradox-Government-Depression-ebook/dp/B0181NISTW

u/repmack · 1 pointr/Anarcho_Capitalism

They're infatuated with central banks because they recognise that they are largely the cause of economic crisis. Hence Friedman's book, A monetary history of the United States.

u/independent_hitter · 0 pointsr/Buttcoin

A YouTube video by one of the two most prominent economists of the 20th century, and the single most prominent monetary economist in history.

If you prefer the long form you can read this:
http://www.amazon.com/Monetary-History-United-States-1867-1960/dp/0691003548