Kasriel: Treason, Friedman, and Credit

Provocative credit-conditions deck from Northern Trust’s Paul Kasriel. Click to read the whole thing.




  1. Desperation is a stinky cologne. This takes some liberties with Friedman and Hayek "recommended a form of quantitative easing" that's a fail. I guess he thought he gave himself room with "an economic environment such as the one now exists" which what means he can define that environment and hence Hayek's agreement?

    The lengths economists will go to to not address basic structural inequities is amazing.

  2. Paul Kasriel says:

    Friedrich Hayek, wrote that "there is no justification for supporting or permitting a process of deflation." In particular, positive intervention by the monetary authorities could bring advantages "in the later stages of a depression" when "deliberate attempts to maintain the money stream" would be justified to counter the "cumulative process of secondary deflation." I found this in a book entitled " The Economics of Friedrich Hayek, " by G. R. Steele on p.134.

  3. It won't be that effective while the private sector is so intent on destroying credit. Better to create and distribute the money that allows them to do so then try to push more on to them.

  4. This is surely a provocative written by an economist who commands the respect of many people who don't generally respect economists. Yet the argument depends crucially on the idea that (non-consumer) private demand will rise to meet the supply created by QE, and secondarily that QE won't create asset bubbles (where arguable it already has). My understanding is that Friedman came to the view that the Fed should directly target the supply of money rather than credit. To a simple non-economist, this would seem to require QE plus monetization. This would be considered treason by the Church of Fractional Reserve Lending, bankers, and central bankers everywhere, since it expose their irrelevance to our severe deflationary circumstances. To the rest of us, QE is merely stupid and reckless, not necessarily a hanging offense.