By Monty Pelerin, on March 6th, 2010 Can We Have Another Banking Holiday?
“But most commercial banking is “deposit banking” based on a gigantic scam: the idea, which most depositors believe, that their money is down at the bank, ready to be redeemed in cash at any time.” Murray Rothbard
One of the most painful and important aspects of the Great Depression was the failure of banks. It has been estimated that before the Depression there were more than 25,000 banks in this country. At the end of 1933, 14,207 were left.
Depositors lost all or much of their money when their bank failed. Most banks were small, not unlike the one depicted in Jimmy Stewart’s classic movie “It’s a Wonderful Life.” When a bank failed in a town, fear spread. A contagion developed that caused depositors to remove money from other banks and “hoard” it. This reaction put pressure on otherwise sound banks and the banking system. A self-reinforcing spiral reduced the availability of money resulting in additional closings.
One of the first New Deal legislative acts was the closing of the banks, known as a national banking holiday. Banks were closed for about a week. Neither deposits nor withdrawals were allowed.
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The Federal Deposit Insurance Corporation was formed in 1934. Its intent was to prevent future runs on the banking system that had occurred in the early years of the Depression. Sheila Bair, current Chair of the FDIC, referenced Milton Friedman who “once called the FDIC the ‘single most important
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By Monty Pelerin, on March 2nd, 2010 Economic development vs. undevelopment affects lives. The populations of undeveloped countries live close to the subsistence level, often one drought, poor growing season or other exogenous event away from famine. But economic development does more than assure ample food production. It is often the difference between life and death in a number of ways. Recent tragic events in Haiti and Chile demonstrated only too clearly the advantages of a productive versus an unproductive economy.
Bret Stephens in The Wall Street Journal focused on building quality and stated: “It’s not by chance that Chileans were living in houses of brick—and Haitians in houses of straw—when the wolf arrived to try to blow them down.” The more wealth a country has, the more options it has. That is why poor countries tend to be worse polluters than rich ones. Clean air is a luxury good that persons barely eking out a subsistence living can afford. So too, are houses built to withstand hundred-year events.
Stephens editorial deals with Milton Friedman’s oft-criticized role in helping Chile rebuild its economy and some of the loonie left criticisms that were leveled at him.
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By Monty Pelerin, on February 12th, 2010 More of Friedman at the Mayo Clinic. While dealing with healthcare, the lessons apply to government in general.
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By Monty Pelerin, on February 11th, 2010
Image via Wikipedia
Image via Wikipedia
Milton Friedman on Socialized Medicine. From a talk given at the Mayo Clinic in 1978.
Although over 30 years old and focused on the medical industry, there are lessons here beyond the obvious. The semi-alert and above will recognize the process as a general one that applies to any industry in which the government becomes involved.
The video provides a prescient framework for where we were heading in 1978 and where we are in 2010. There is nothing new in this video in the sense that the insights were unique to Friedman. Economists have known these truths since before Adam Smith. What is unique is the clarity and force with which Friedman delivers the message. But that was not unique to this topic for Friedman. It was a staple of his discourse on any subject.
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Video Flashback: Milton Friedman and Two Big Government Schmucks (seekingalpha.com)
Economic Crisis 2008-9: Ignore Friedman’s Lessons at Your Peril (seekingalpha.com)
What Milton Friedman Actually Said About Campaign Finance (blogs.hbr.org)
Free to Choose with Milton Friedman (kottke.org)
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By Monty Pelerin, on February 10th, 2010 The irrepressible Milton Friedman speaking about tariffs. Common sense for more than 200 years that periodically needs repeating. As the political class discusses jobs and their creation, watch for free trade to come under attack. Send your representative this short video.
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Friedrich von Hayek
Friedrich von Hayek founded the Mont Pelerin Society.
“Monty Pelerin” is a pseudonym chosen by this blogger to convey general agreement with the philosophy, goals and spirit of the Mont Pelerin Society. No other connection exists between the blogger and the Society.
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