The Great Economists Milton Friedman2

Transperency in policy making is usually considered preferable, but in crisis mode opacity ….

Might be the better option

The Federal Reserve also made a number of large-scale purchases in QE. …, thus injecting that amount of cash into the economy. In November 2010, as the economy wobbled, it made further purchases of long-term treasury bonds amounting to $600 billion in September 2012 when the Fed announced the purchase of $40 billion in mortgage-backed securities each month for an indefinite period. This was dubbed “QE infinity“ by investors. The final QE programme was raised to …. By the time QE was halted in October 2014, the three QE programmes had seen the Federal Reserve accumulate a staggering $45 billion in assets.

Between November 2008 and June 2010, it purchased around $175 billion of long-term securities … $65 billion per month in June 2013

In 2008 the AIG was rescued as the Fed

Was concerned about the impact on the credit default swap market if it were allowed to fail

In the global financial crisis, the Federal Reserve provided …. Friedman’s recommended approach in the Great Depression was simply to flood the economy with general liquidity and allow solvency issues to sort themselves out. He might have viewed the targeted intervention made by the Fed, i.e to save BearSteams and AIG but allow Lehman Brothers to go under, as undermining its …. There were now players in the financial sector that were literally too big to fail, in the sense that they might bring down the entire system with them.

Direct credit to specific markets and businesses in need of liquidity … Independence and credibility and getting involved in specific cases

Japan was the first country to adopt QE after its real estate bubble burst in the early 1990s’, so this policy was initially used …. Friedman: “The surest road to a healthy economic recovery is to increase the rate of monetary growth.“

Nearly two decades before the global financial crisis

Defenders of the Bank of Japan will say, … What more can it do to increase the quantity of money? The answer is straightforward: …, what economists call high-powered money. Most of the proceeds will end up in commercial banks, adding to their reserves and enabling them to expand their liabilities by loans and local market purchases.

The Bank of Japan can buy government bonds on the open market, paying for them with either currency or deposits at the Bank of Japan

Since he supported QE in Japan, Friedman would have viewed the use of unconventional policies such as cash injections by the US, the UK the euro area, and elsewhere as just as necessary to ….

Get lending going in these economies

Friedman would say that … was the reason why the Great Depression was “Great”.

Not acting to keep money flying in the system