Friedman's point of view on the Great Depression

Friedman wrote extensively on the Great Depression. He called this depression, which began in the late 1920s and peaked in early 1933, the Great Contraction.

He argued that the depression was far from a failure of the free-enterprise system or due to a lack of investment, but a tragic failure of the government. He believed that the depression lasted so long due to the Federal Reserve's mismanagement. The FED declines the quantity of money by one-third from 1929 to 1933. It attributed deflationary spirals to the reverse effect of a failure of a central bank to support the money supply during a liquidity crunch.

Source: http://www.cato.org/pubs/journal/cj28n2/cj28n2-13.pdf

Gerbrand Vidts