24 Mar 2010

Austrian vs. Fed Debate

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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.)

4 Responses to “Austrian vs. Fed Debate”

  1. Nico says:

    Works well here. If it doesn’t, try letting it load before playing.

    Interesting video.

  2. Ash Navabi says:

    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?

  3. bobmurphy says:

    Ash, I don’t know of such an exposition.

  4. Evan says:

    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?