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Quote of the Day (Jan. 17, 2009)

January 17, 2009

Quotemarks "Since Friedmanite gradualism will not permit a sharp enough recession to clear out the debt, this means that the American economy will be increasingly faced with two alternatives; either a massive deflationary 1929-type depression to clear out the debt, or a massive inflationary bailout by the Federal Reserve. Hard money rhetoric or no rhetoric, the timidity and confusion of [policy makers] make clear what its choice will be: massive inflation of money and credit, and hence the resumpton of double-digit and perhaps higher inflation, which will drive interest rates higher and prevent recovery. A Democratic administration may be expected to inflate with even more enthusiasm. We can look forward, therefore, not precisely to a 1929-type depression, but to an inflationary depression of massive proportions. Until then, the Austrian program of hard money, the gold standard, abolition of the Fed, and laissez-faire will have been rejected by everyone -- economists, politicians, and the public -- as too harsh and Draconian. But Austrian policies are comfortable and moderate compared to the economic hell of permanent inflation, stagnation, high unemployment, and inflationary depression that Keynesians and Friedmanite neo-Keynesians have gotten us into...."

-- Murray N. Rothbard, America's Great Depression, introduction to the fourth edition (1982)

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