It's Just a Question of Exit and Entry: Look Who Agrees with Me!

Anna Schwartz and Milton Friedman wrote A Monetary History of the United States, in which they blamed many economic contractions (or at least the persistence of those contractions) on a failure of the government (esp. the Federal Reserve) to sufficiently expand the money supply. They did not think that letting banks fail was a good public policy for the 1930s.

I admire both authors. I deeply admire Milton Friedman's work in a wide range of areas. So I thought long and hard as to whether I should speak out about my conclusion that today's problem is "merely" one of entry and exit in the banking industry. But the more I thought about it, the more I became convinced that (among other things) the 1930s were different, and today the logic of supply and demand clearly point toward the exit-entry solution.

So I was pleasantly surprised, to say the least, to see Anna Schwartz quoted as saying "They should not be recapitalizing firms that should be shut down" in October 2008!