Paul Krugman mocks conservative inflation truthers

[Fortinbras Armstrong]

6. Milton Friedman damned the Federal Reserve for not expanding the money supply in the Depression

Friedman, in his Monetary History of the United States, said that the Federal Reserve was responsible for many of the woes of the Great Depression in the US because the Fed did not expand the money supply to any real extent until 1931.

He glosses over the minor fact that the Fed was required by law to be able to back 40% of the money with gold. Thus, the Fed had hit the limit of the allowable money supply because it simply had no more gold available to it.

Admittedly, the Fed did some quite stupid things, such as a deliberate tightening of monetary policy, including raising interest rates. It was not until 1933 -- i.e., after FDR became President and named Eugene Black as Federal Reserve Chairman -- that the US went off the gold standard, so the Fed lowered interest rates and increased the money supply.