By Frank Shostak
For many, it has now become settled wisdom that the massive monetary pumping by the US central bank during and after the 2008 financial crisis saved the US and the world from another Great Depression. Hence, the Federal Reserve Chairman at the time - Ben Bernanke (AKA "Helicopter Ben") - is considered the man who saved the world. Bernanke, in turn, attributes his actions to the writings of Professor Milton Friedman, who blamed the Federal Reserve for causing the Great Depression of the 1930s by allowing the money supply to plunge by over 30%.
The reality, however, is quite different. It is not a collapse in the money stock that sets in motion an economic slump, but rather the prior monetary pumping that undermines the economy's pool of real wealth by falsifying market signals and creating massive distortions that "prime" the economy for any subsequent reduction of the flow of credit.
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