Hayek's explanation for the onset of the Great Depression was that the Federal Reserve and Bank of England injected credit during the 1920s in an environment of rising productivity to keep the price level from falling; inspired by stabilizationist ideas, this credit injection distorted the interest rate and caused the eventual downturn—so a flat price level was not a reliable indicator of health, and one had to look at relative prices and the structure of production.

causalpending

Speaker

Larry White

Evidence Quote

they had injected money in an environment of rising productivity of a genuine period of high growth in the economy in order to keep the price level from falling

Source

Larry White on Hayek and Money 02/01/2010EconTalk
Created: 6/17/2026, 10:31:20 AM

My Notes

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