Cause of the Great Depression

P8475423 at vmsuser.acsu.unsw.EDU.AU P8475423 at vmsuser.acsu.unsw.EDU.AU
Wed Sep 20 22:18:14 MDT 1995

Unfortunately, Critical Review isn't available in Sydney(!), so I
won't be able to chase up the Smiley paper; though I will eventually
take a look at Rothbard.

But I would also suggest that Austrians take a look at the Kydland
paper I cited. There is a discernible difference between PK and
Austrianism here, with the former believing that the money supply
is endogenous, the latter apparently believing that it is possible
to design a regime in which it is exogenous (the gold standard
appears to play a role here?). Also, the interpretation Chris
summarised had the (exogenous) actions of the Reserve fueling
the process of boom in the '20s that led to the '29 Crash. The
PK interpretation, as in the Minsky excerpt I attached, would be
that the increase in cash etc. that occurred was an endogenous
product of the euphoric expectations that developed during the

The PK approach seems to be supported by the Kydland paper:
money supply follows the boom, it doesn't lead it; credit
leads, but it's credit created endogenously, not M1 which is
(supposedly) under the control of the Reserve.

Steve K

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