What is the right measure to take during a economic recession?
Neither of these is the right way forward. Minimum interest rates and expansion of the money supply will store up serious inflationary and fiscal problems for the future. If Government undertakes spending “on behalf of the community” by borrowing and [in effect] printing money, then one day taxpayers will have to redeem the national debt. The free market, acting by itself, has got the financial world into its present situation. Why is there so much toxic debt? Why are banks unable to meet their commitments? Why are industrial companies unwilling to borrow and invest, even at interest rates of 1 per cent? Because the free market was left to do its own thing, and had neither the intelligence nor the ethics to control the greed of its participants or manage the expectations of customers. Monetary policy, by itself, will not be sufficient. When prime lending rates get to be about zero per cent, what will be left for the monetarists to try? Well, there’ll be so-called quantitative managemen
