FEBRUARY 3, 2009 --

LPR has been wondering if adjustment by the Federal Reserve Board, from time to time, of the prime rate of interest, is intended to boost the economy – or merely to boost stock market prices?

LPR has also been wondering: what has happened to the instruction from the late Milton Friedman that the Great Depression was caused by mistaken monetary policies implemented by the Fed, and not by the 1929 stock market crash?

Indeed, what happened to the acknowledgment of Ben S. Bernanke,
on the occasion of Friedman’s 90th birthday, that the Fed was responsible for the Great Depression. On that occasion, Bernanke, then on the Fed’s board of governors and now Fed chairman, went on to apologize and declare that the Fed will not do it again? Yet, LPR is not aware of any recent mention of Milton Friedman by Chairman Bernanke.

The New York Times, January 26, ran an article that stated, in a sub-head, "Obama Is Challenged to Surpass The Uneven Success of Roosevelt.” The article, by Steve Lohr, suggested that there are lessons for today to be learned from the efforts of President Franklin D. Roosevelt to end the Great Depression.

Lohr quoting business author John Steele Gordon, indicates that there is a psychological aspect to economic depressions. LPR wonders if there is also a political aspect to dealing with economic depressions – with policies on the economy developed from a political agenda, not a search for truth..

There is no mention of Milton Friedman in the Lohr article, no mention that although banks closed in the U.S., they didn’t close in Britain. As noted above, the Lohr article carried a sub-head acknowledging that FDR’s policies did not much boost the economy. Friedman, and co-author Anna J. Schwartz, researched the Fed’s key role in causing and maintaining the Great Depression years later. LPR is concerned that failure by President Obama to read up on Friedman and Schwartz will have a Times article, at the start of the presidential campaign of 2012, acknowledging “the uneven success” of the Obama administration in reviving the economy.