Bettina Bien Greaves on Friedman I am privileged to have met Mrs. Greaves (and her adorable dog) and spoken with her at some length, so her amazing clarity on economic issues comes as no surprise. And of course her perfect tone that manages to hold Friedman's feet to the academic fire while acknowledging his positive work for freedom instructs but, again, does not surprise me. But her writing still is a pleasant break for a boring Monday.

A selection from a recent letter to THE FREEMAN :

Thanks to Milton Friedman's brilliance, charisma and diplomacy he became an ardent spokesman for many free market reforms in this country. And now Ivan Pongracic, Jr. ("The Great Depression According to Milton Friedman," September 2007) gives him credit for convincing Fed officials that the Fed itself was responsible for precipitating the crash and the 1929-1933 monetary contractions that followed. But the contractions were only the spark that brought the boom to an end; the seeds of the depression itself were sown in the preceding boom.

Pongracic says Keynes had "rejected the view that the boom-bust cycle was due to over-expansive government monetary policy.... Keynes claimed that private investment is inherently unstable due to what he called the 'animal spirits' of businessmen/capitalists.... Like sheep that blindly follow other sheep in the herd, it is easy for businessmen to become 'irrationally exuberant." Friedman and Schwartz in their massive history of money apparently accepted that Keynesian explanation, at least in part -- attributing the stock-market crash of October 1929 to a "speculative investment bubble," the cause of which was "a somewhat controversial topic." But the cause of that "bubble," the seeds of the crisis, were actually inherent in the very principles on which the Fed was founded.   ¶ 12:24 PM