The Collapse of Real Savings Caused the Great Depression

Source: Ludwig von Mises Institute
by Frank Shostak

“The leading monetarist, Milton Friedman, blamed the Federal Reserve System’s policies for causing the Great Depression of the 1930s. According to Friedman, the Fed failed to pump enough reserves into the banking system to prevent a collapse of the money stock. Because of this, Friedman held that M1, which stood at $26.34 billion on March 1930, fell to $19.00 billion by April 1933 — a decline of 27.9 percent. … But is it possible that the failure of the Fed to lift the money supply caused the collapse of economic growth? If this is the case, money should be regarded as an agent of economic growth. The whole idea that economic growth requires monetary expansion gives the impression that money somehow sustains economic activity.” (06/27/24)