Financial lessons

WE MAY be facing the “worst depression ever” (your report, 7 October), but we can learn lessons from the 1930s.

Polar opposites Milton Friedman and JK Galbraith used the common metaphor “monetary policy is a piece of string”. You pull on it to stop inflation, but you can’t push it to stop a depression. Hence for Galbraith it is the “state of trade” that affects money supply, not vice-versa.

However, even in 1933 there was disagreement over the recommendation to inject funds directly into companies.

It became obvious, however, that creating money didn’t work unless it was spent directly in boosting trade.

ELLIS THORPE

Old Chapel Walk

Inverurie, Aberdeenshire