What is your opinion about the decision of the US Treasury Department to consider taking ownership stakes in many United States banks?
Do you think this is the right political-economic strategy? I mean, will it lead to the recovery of the system? JBF: The Treasury Department proposal to purchase majority shares in major US banks (the extent of this is still not clear) is, in a US context, an act of sheer desperation, following a whole series of increasingly desperate actions. It signals that the crisis is out of control. The standard operating procedure whenever there is a major credit crisis is to activate the lender of last resort function and for the central bank to flood the economy with liquidity, while bailing out large financial and economic institutions that threaten to bring down the whole ship. Since the publication in 1963 of Milton Friedman and Anna Schwarz’s A Monetary History of the United States, most US economists have come to believe that the Great Depression was a result of the failure to open up the monetary floodgates when necessary; that it had little to do with the real economy. All of the prevai
