Jennifer Burns
speaker
543 appearances
2 recordings
2 series
first heard Jan 2025
last heard 2 Feb
Jennifer Burns’s voice in public audio — every appearance, attributed to the second.
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recordings per month · last 12 monthsRecordings per month over the last 12 months — 1 in all, peaking in Feb 2026 with 1.
Appearances
So Friedman has that imprinting. And then about—so that's—he gets there in 1932. 36, 37, the ideas of John Maynard Keynes from Britain, which has a different explanation. Keynes has a different explanation. The Great Depression will kind of make landfall in American economics and be very profoundly influential on most American economists. But Friedman already, it's too late for Friedman.
He already has a different perspective. So Keynesianism unfolds. I can say more about that. But it basically leads to more active federal government participation in the economy. And what underlies a lot of that, its adaptation in America particularly, is the idea that capitalism has failed. Capitalism has revealed itself to have a profound flaw.
in that its cycles of boom and bust create social instability, chaos. It needs to be tamed. It needs to be regulated. And so that becomes the kind of baseline of politics in the United States, the understanding of the New Deal, the understanding of the Democratic Party, even to some extent, the understanding of the Republican Party. And Friedman never quite Now, we're quite sure about that.
He has a hunch that there's something else going on, and he does not buy that capitalism has sort of ground to a halt, or the other idea is that capitalism has gone through some sort of phase transition. And it worked great maybe while we had a frontier. This is a very serious argument that people are making. The United States used to have a frontier, a place where Europeans hadn't fully settled.
Of course, they're pushing out the native tribes. That's another story. But that this frontier is the engine of economic growth. And the frontier is now over. It's closed. And we're going to stagnate. There's a theory of secular stagnation. And so to deal with secular stagnation, we're just going to have to have a more active state. So Friedman is suspicious of all these assumptions.
And he has this idea that it's something to do with money. Money is somehow important. And so he joins together with Anna Schwartz, who is an economist. She doesn't at this time hold a PhD. She's working for the National Bureau of Economic Research. And they come together to do this study of money in the U.S. economy. And It takes them 12 years to write the book.
And they're releasing their ideas and they're arguing. And Friedman is writing papers, giving talks, saying money is really important. And nobody's really believing him. He's a crank. He's at Chicago. He's out, you know, Chicago is a well-known university, but he's sort of considered a crank. And then in 63, he and Anna Schwartz publish this book. And it's, you know, 800 pages.
It's a reinterpretation of the history of the United States through money. Like the central character is money, whether it's specie, greenback, or the U.S. currency. And they have a whole chapter on the Great Depression. And what they've literally done, Schwartz has done most of this. They've gone, Schwartz has gone to banks and said, show me your books. And then she's added up column by column.
How much money is in your vault? How much money is on deposit? How much money is circulating? And so they literally have graphs, you can see them in the book, of how much money has been circulating in the U.S. at various different points in time. And when they get to the Great Depression, they find the quantity of money available in the economy goes down by a third.
And in some ways, this is completely obvious because so many banks... have failed. And we don't have any type of bank insurance at that point. So if your bank goes under, your savings are there, the money essentially vanishes. And it's fractional reserve banking, right? So you've put in, they can loan up to 90% on their deposits. And so Friedman and Schwartz present this argument
that what really made the Great Depression so bad was this drop in the amount of money, the 30% drop in the money. They call it the Great Contraction. And then they go further and they say, well, how did this happen and why? And they... pinpoint the Federal Reserve, which is a fairly new institution at that time. And they say, what did the Federal Reserve do, the lender of last resort?
What did it do in the face of what they're depicting as a massive, unprecedented liquidity crisis? And they find it's not really doing much. And they really dig into the details. And they find that the Federal Reserve has gone through a sort of personnel change. And some of the key leaders in the 1920s, Benjamin Strong is one of them. He's now deceased.
And the dominance of the New York Federal Reserve, which in their telling, you know, is global. It's interconnected. It's seen a lot of financial things come and go. And they believe that the New York Fed had the understanding to recognize this is a liquidity crisis. We should be very generous. We should support all the banks.
Their influence has diminished for the kind of banks that are more conservative. They don't say like the Rubes and the Hicks, but it basically is. It's like the people in charge don't know what they're doing. And so the Fed pursues this kind of policy of masterly inactivity. They don't see it as a problem. They don't do much. There's an enormous liquidity crisis. And that's their...
version of what the Great Depression is all about, that it's a financial system meltdown, it's a liquidity crisis, and that it in some ways, well, in many ways, they argue very strong counterfactual argument. The Federal Reserve could have prevented it. and it did not. And so it becomes then an institutional failure and a political failure, not a failure of capitalism as a system.
And so this book comes out, it's a blockbuster, and even those economists who've been like, Friedman is a crank, I don't buy it, are like, Friedman and Schwartz are on to something. Milton Friedman and Anna Schwartz are on to something. And so that really changes the game.
And this is also one of his most influential contributions because Friedman and Schwartz becomes the playbook for the Federal Reserve. And we have lived through this, right? In the financial crisis, the Federal Reserve is ready to loan. COVID. The Federal Reserve does all kinds of new things.
Because no Federal Reserve chair wants to be in Friedman and Schwartz 2.0 that somebody writes, or they're the bad guy who let the economy melt down. So the specifics of what they say to do have obviously evolved as the system has changed. But this is a playbook for how to deal with economic crisis. It's Friedman and Schwartz. And so it's absolutely fundamental.
And that is really going to be the place he makes his mark.
Yes.
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