Professor Friedman argues that the Great Depression was caused by the Fed's reluctance and ultimate failure to provide sufficient liquidity to the fiancial system in order to save it from collapse. This is pure folly, as the Fed cut rates from 6.0% to 1.5% during 1929-31, during a time when the money supply did not decline until late 1930 and early 1931, while the stock market fell nearly 75%.

While some counter with the argument that Smoot-Hawley Tarrif Act of 1930 (which took effect in mid-1931) caused the Depression, nations such as Argentina, Australia, Canada, New Zealand, Portugal, the Dutch East Indies, and South Africa all began raising tariffs in 1928-29 against a backdrop of commodities price deflation and a collapse in currencies.

I am sorry, Professor Friedman, the Great Depression was caused by misinvestment, excessive credit expansion, and structural collapse in the international credit system. Sound familiar (October 1998)?

Monetary History of the US served a vital purpose when it first came out, and still has much use value. For a brief period, economists ignored the importance of variations in the nominal quantity of money to business cycles. This book provided important evidence that helped correct that error. Economists used to focus on spending rather than the money supply. This book, along with subsequent work, showed that money matters.

The most important part of this book is the section on the Great Contraction. Federal Reserve policy did contract the money supply by 1/3 during the early years of the depression. The Federal Reserve did revive the depression by increasing reserve requirements in 1937. The collapse of the banking system collapsed the real economy. The recovery of the banking system was important to the recovery of industry. Money matters.

The style of this book is excellent. Considering the sophistication of its subject matter, it is highly readable. It gets into both statistics and relevant written history. It also has a helpful appendix on the determinants of the money supply.

There are some problems with this book. Money is not all that matters. Government policies that prevented wage deflation contributed greatly to the Great Depression. Of course, this book was meant to focus on monetary history alone, as the title implies. But, readers must keep the limitations of such a narrow focus in mind when considering the explanatory power of this book. Its' authors also have too little appreciation for private banking systems (Friedman latter embraced free banking). Despite its' limitations, this book is important as a empirical source for understanding how money matters to economic conditions.

This monumental work swept away all the now archaic notions about especially the great depression. The old rationalisms that the causes of the depression were 1) the Smoot Hawley terrif 2)over speculation in the stock market or 3)that lower interrest rates are the same as increased liquidity have been swept in to the dust bin of history repeated now only by the technically challenged.