If you didn’t think there was a wink and a nod relationship between large banks and the feds, the “Volcker Rule” should serve as an acknowledgment. Because lending and credit is so crucial to the economy, financial institutions know the government will backstop them during crisis mode in the industry.

Many on the left, such as hack journalist Naomi Klein, blame our current mess on Milton Friedman and his economic policies. Others, such as current Fed chairman, Ben Bernanke claim to be a follower of the Nobel prize winning economist. After admitting the Great Depression was the Federal Reserve’s fault, like Friedman and his colleague Anna Schwartz claimed, Bernanke said, “But thanks to you, we won’t do it again.” Since Friedman believed what caused the depression was rampant deflation, Bernanke presumably believes the Fed’s massive increase in the quantity of money will stabilize the economy. So is he following Friedman’s advice? Well not quite, you see, Friedman kinda thought we should go ahead and abolish the Federal Reserve:

David Walker, the former comptroller general of the GAO, has said the United States is on pace for bankruptcy. Fiscally speaking, things look really bad. So what should we do? Well, real estate developer Aaron Bistons has an idea and a petition to back it up. Sell Alaska!

Now that we can admit Hoover did more than any president before him in fighting off an economic recession, what should we conclude from this… The first time the Federal Government significantly intervenes to stop an economic downturn just happens to be at the beginning of the worst depression in American history, thus proving the government didn’t do enough?

What this whole mess elucidates is, as far as politics (and subsequently, economic policy) are concerned, actual positions are of little importance. All that matters is that you root for your team, be they Democrats or Republicans. Thus, we see Fox News begin to attack every push for increased state power, while MSNBC defends such policies. Under Bush, it was the opposite.

There are major advantages to 100% reserve banking. Right off the bat, banking panics are simply impossible. Since every bank has all its money on hand (or its customers aren’t contractually entitled to it at that time), there is no way that a run on the bank will cause a bank to go under. And therefore, large banking crises, such as the one we are seeing today, or saw in the Great Depression, or in the panics of 1819, 1837, 1857, 1871, 1893, 1907, etc. would never happen.

Inflation was thus misinterpreted as wealth, leading American consumers to borrow more and more, especially against their overvalued homes. Total mortgage debt in the United States is now around 12.5 trillion, up from $1.5 trillion in 1980! Total household debt was around 50% of GDP in 1980 and is over 100% today. And the personal saving rate was around negative 1%, for most of the last decade.

Usury law is a notion that has had various interpretations and applications. To some, it means resisting charging any interest at all on a loan. For others, it means prohibiting exorbitant interest rate charges on loans.

Milton Friedman offers perspective on the banking system and explains what a bank run is. In this video, he looks back to the Great Depression and examines the Federal Reserve’s role in such a crisis. There mare many parallels to the Great Depression and what is going on in the financial sector meltdown today. The Federal Reserve’s role in a bank run, and as a steward over the economy in general, is a great debate. What do you think?

Nationally, things were a little better as the average price hit a record $3.24 a gallon in May of last year. But then Christmas came early. Apparently the oil executives felt guilty about their record setting profits and felt like they should give some of it back to us less fortunate.