The New Deal and Recovery, Part 16: The Keynesian Myth, Continued

George Selgin(The first installment of " The Keynesian Myth " ishere.)All-American Money MakersAlthough conventional wisdom has it that Keynes considered government spending far more capable of ending the depression than monetary expansion, that certainly wasn ' t his view in 1931: during lectures he gave then at the University of Chicago, he disappointed faculty members who themselves favored more spending on public works over monetary easing by expressing the opposite opinion.Nor had Keynes lost faith in monetary policy in March 1933, when he published a series of articles in the LondonTimes,later republished as a pamphlet calledThe Means to Prosperity.In the second installment of that series, on " The Raising of Prices, " Keynes argued that boosting the public ' s " aggregate spending power " called for aggressive " open-market operations to make bank credit cheap and abundant. " He then went on to accuse the Fed of having " bungled " by failing to load up on securities while it was still flush with gold.As I showedelsewhere in this series, after Roosevelt took office the Fed kept right on bungling. Althoughthe Thomas amendment authorized him to compel the Fed banks to buy up to $3 billion worth of government securities, he never took advantage of that authority.[1] Nor did his dismantlement of the gold standard make much difference: despite it, the Fed ' s combined holdings of bills and securities remained virtually flat throughout the New Deal.It is, nevertheless, mislea...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs