Monetarism blamed the Depression on Fed policy, not underconsumption

Evidence

Monetarism is a set of ideas developed in the 1960s and 1970s, most notably by Milton Friedman in the United States and by Patrick Minford in the United Kingdom. Monetarism’s basic claims are twofold, with the first clearing the ground for the second’s more substantive argument about the pathologies of the state. First, the Great Depression was caused by shortsighted Federal Reserve policy that led to a decline in the money supply. Contra Keynesianism, it was not caused by underconsumption or by a decline in the level of money income. This claim called into question the causal relationship between money and income seen by Keynesians. Second, and more important for enabling austerity arguments a generation later, is Freidman arguing that attempts by the government to stimulate the economy to full employment, which it would be tempted to do if it got that causal relationship backwards, can only show up as inflation. — Mark Blyth, Austerity, 408

Categorization

• XREF: Connects to Mattei’s work on how monetarism replaced Keynesian fiscal policy as the governing paradigm. — connects to: Robbins blamed state interventions rather than market failure for the Depression — Angus Burgin, The Great Persuasion: Reinventing Free…, 73; The Fed’s amnesty extended to shielding economic theory itself from blame — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 513; Loose monetary policy plus oil shocks triggered the 1973 economic crisis — David Harvey, The Condition of Postmodernity: An…, 861 (+4 more)
• DEFINE: Lays out monetarism’s two foundational claims: Depression as monetary failure, and stimulus as inflation-generating.

Broader Connections

• Monetary-credit expansion alone seemed sufficient to cure unemployment in Treasury orthodoxy #corroborates (0.78) — Clara E. Mattei, The Capital Order, 1695
• Robbins blamed state interventions rather than market failure for the Depression #complicates (0.75) — Angus Burgin, The Great Persuasion, 73
• The Fed’s amnesty extended to shielding economic theory itself from blame #expands (0.72) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 513
• Loose monetary policy plus oil shocks triggered the 1973 economic crisis #complicates (0.72) — David Harvey, The Condition of Postmodernity, 861
• Federal crisis bailouts enacted Milton Friedman’s Depression remedy of shielding the wealthy #complicates (0.72) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 508