Respect the Wisdom of Age

I just read a great piece from the Wall Street Journal, thanks to the Man(kiw). It is an interview with Anna Schwartz, probably the most learned in monetary policy in the world. She co-wrote the book "A Monetary History of the United States" with Milton Friedman, and she is 92 years old; old enough to remember the first Great Depression.

To summarize, the problem with the Depression were ill-liquid banks. This problem was exacerbated by the lack of central banks to provide assets to banks, and banks failed under the runs. Today, the problem isn't the liquidity, it's the trust. Information is not flowing freely and the market cannot discern which institutions are credit worthy. However, the central banks are treating this like a lack of money problem, and not a lack of confidence/information problem. In other words, they are fighting the wrong war.

Take a minute or two to read it. Thanks for the great link, professor.

By the way, we at the Garden, realize that our fraction of the internet has become a little more serious than what it used to be. We feel, however, that blogging about the economy every once in a while is somewhat therapeutic for us as well as informative for you, the reader. We hope, when you click away from the Garden, you do so a little more enlightened.