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Never have I heard that William Jennings Bryan was promoting monetarist policy long before Milton Friedman and Anna Schwartz published their ideas. This article claims that Bryan promoted and practiced monetary policy in fighting the US recession of 1893, predating the birth of formal monetarist economics by about 60 years.

The author (I can not find his or her name) also claims that increasing money supplies now is what the US needs, not Keynesian style fiscal policy. One catchy phrase, “deflation is more dangerous than cheap money,” is used to support the notion that our fears of inflation are misplaced right now. In fact, inflation would be good for many people–

Yet – as Bryan argued in 1896 – inflation is what we need. In an inflation, debts gradually melt, and depressed assets like houses begin to recover their value relative to cash.

Defenders of the administration argue that there is nothing more that the Federal Reserve can do — that it has already cut interest rates to zero, that monetary policy is exhausted. But there’s always more that monetary policy can do! As Milton Friedman famously proposed back in 1968, when all else fails, the monetary authorities can print money, load it into helicopters, and drop cash over the landscape. That’s stimulating!

It is also argued that money growth is a natural way to battle deflation, but–despite the observation of cheaper housing–I do not think the data backs-up the deflation argument.

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2 Comments

  1. Indeed, inflation is better than deflation from all the economists’ points of view.
    Provided that people expect a higher price in the future, they will buy the goods now. This ignites the desire of people to consume. Deflation, however, will have the opposite effect. A fall in aggregate demand will absolutely lead to a recession.

  2. Well, it depends.
    As far as i am concerned, US citizens are self-righteous for their country had been the dominator of currency in the world for a long time. However, current deflation trend virtually depresses US guys. They no longer enjoy the ease with their currency. Thus, i agree with the point that it is more beneficial to be in an inflation situation instead of a deflation one.


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