Thinking About Bank Runs: Are We All Monetarists or We are all Keynesian?

Milton Friedman was a great economist. So was John Maynard Keynes. Friedman was a great narrator of ideas economics. I find his story (see video) about the role, or lack thereof, of the Rederal Reserve System in the run-up to the Great Depression.

I suspect the architects of the Federal Reserve System had been inspired by the compelling work of Walter Bagehot in his seminal 1873 book, Lombard Street: A Description of the Money Market. The Bagehot prescription to central banks during time of panic:
(a) lend freely,
(b) at high interest rate,
(c) on good security.

The Fed didn't do any of these three according to Friedman, thus leading to the heart depression.
But it doesn't end there. While he is full of praises for Keynes, the thinks that his followers irresponsibly used his ideas, consequently high inflation experienced post the Great Depression.

I have my suspicion that Friedman was pushing his idea like you,can push a string! I could ask: What caused the bank runs?  The real economy challenges that frustrated business that had relationship with banks.

Keynes saw such challenges as insufficient demand. His ideas were carefully cratfted in The General Theory of Money, Interest and Employment. By general, Keynes didn't mean that is was generally applicable. He gave insights on what fiscal policy can do in the event of insufficient demand.

It is evident that Fredman pushed the Monetarist theory too had; but it wasn't all about money. The recent Great Recession, when money was abundant thanks to Quantitative Easing and other non-conventional monetary policy tools, wasn't enough.

With interest rates close to zero, those economies that acted Keynesian are now seeing some bit of recovery. Those that went the austerity route are not busy saying that easy money failed!

The moral of the story: the difference between money from the fiscal source and from the monetary source is not mere nuance!