24
Mar
2010
Austrian vs. Fed Debate
Yesterday at Campbell Law School in Raleigh, NC I had a friendly debate with Matthew Martin, a senior vice president at the Federal Reserve Bank of Richmond. The topic was, “Did the Fed Avert a Second Great Depression?”
The format was a 15-minute intro by Matt, a 15-minute intro by me, then 5-minute rebuttals by each, and then audience Q&A. Matt was very intellectually honest, and I hope I was too.
Here is the full video, but on my computer I’m having trouble watching it; it’s rather choppy. Let me know in the comments please if you are able to watch it. (Thanks to Mitch Kokai of the John Locke Foundation for recording it.)
Works well here. If it doesn’t, try letting it load before playing.
Interesting video.
I tried watching the video on a Mac at my school and it didn’t work, but I just saw it in all its glory on my PC at home.
The Fed economist seems like a really nice guy–“Intellectually honest”, as you would say.
On the point about the ’20-’21 depression: I wrote a paper for my school where I basically sited the same thing, and the economy after ’45, and said that, “look, if government expenditure is so great, how come after WWs I and II when G dropped substantially, that the economy didn’t have a death spiral?” My prof, who was generally very positive about the paper, commented something along the lines of “post-war economies are different”.
Is there/has there been a full exposition of this claim by anyone, Austrian or otherwise?
Ash, I don’t know of such an exposition.
Dr. Murphy,
In one of the questions at the end about your views on the ideal means of money creation, you mention that in a free banking market, demand deposits would need to be kept as 100% reserves. However, didn’t fracitional reserve banking develop out of an essentially free market when money warehousers noticed that, at any given time, only a small fraction of the depositors actually asked for their deposits?
In a free market system, with no FDIC, wouldn’t the banks instead be able to buy private deposit insurance that would cover these deposits in the event of a run on that bank? Wouldn’t this allow them to utilize a fractional reserve policy as long as they kept their reserve ratio and depositor profile (to avoid some kind of engineered run) responsible enough to minimize the risk of a run to the satisfaction of their deposit insurer?
It just seems to me like an inefficient allocation of resources to me that you know for sure that a large percentage of hard money will just be sitting idle. Is there a point I’m missing regarding the feasability of a fractional reserve system in a free market?