Monday, January 14, 2008

Anna Schwartz blames Fed for sub-prime crisis (amv)

Anna Schwartz is most famous for "A Monetary History of the United States 1867-1960" a book she wrote in collaboration with Milton Friedman. She is a proto-type monetarist and even though I am not (as I mentioned here), I admire her for her intellectual depth and wisdom. I once met her at the Cato Institute and even though she is an old lady now, she is extremely tough and highly active. Now, she has written for the British Telegraph. She blames the Fed for the subprime crisis which is a view my fellow co-blogger fg and I share and have mentioned repeatedly in the past (e.g. here). In short, she claims that

"There never would have been a sub-prime mortgage crisis if the Fed had been alert. This is something Alan Greenspan must answer for."

UPDATE (17.01.08): Anna Schwartz and Milton Friedman both adhere to the view that the Great Depression was caused by contractive money supply, that is, by government failure. This is known as the monetarist view on the Great Depression. Krugman reacts to Schwartz's recent comment on Greenspan and the Fed and offers the Keynesian perspective instead. Here you go ...