Must-Read: David Glasner: Milton Friedman’s Cluelessness about the Insane Bank of France
Must-Read: Milton Friedman’s Cluelessness about the Insane Bank of France: “Friedman was not alone in his cluelessness…:
…F. A. Hayek, with whom, apart from their common belief in the price-specie-flow fallacy, Friedman shared almost no opinions about monetary theory and policy, infamously defended the Bank of France in 1932:
France did not prevent her monetary circulation from increasing by the very same amount as that of the gold inflow – and this alone is necessary for the gold standard to function.
Thus, like Friedman, Hayek completely ignored the effect that the monumental accumulation of gold by the Bank of France had on the international value of gold. That Friedman accused the Bank of France of violating the ‘gold-standard rules’ while Hayek denied the accusation simply shows, notwithstanding the citations by the Swedish Central Bank of the work that both did on the Great Depression when awarding them their Nobel Memorial Prizes, how far away they both were from an understanding of what was actually going on during that catastrophic period.