Milton Friedman’s critique of the gold standard has more to do with what the Federal Reserve could or should have done AFTER the market crash, and how its actions were limited by the gold standard. Friedman thought the proper response should have been a sharp injection of liquidity, to prevent banks from going under and thus to stop the spread of panic and bank-runs. The gold standard limits the amount of money federal authorities can print, for they ought to be redeemable in gold. Friedman completely ignores, though, that it’s the departure from the proper operations of the gold standard that caused the market bubble in the first place. He just never addresses the causes of the bubble and initial crash itself. From what we can see in our own present financial trials and tribulations, when the public’s trust is lost, liquidity injections are not even well-absorbed by the financial sector. In 2008, banks borrowed like crazy from the Fed, but they didn’t trickle down the chain that liquidity: they kept lending to each-other at rates above LIBOR, because they feared systemic risk, they doubted one-another’s solvency. Also, it was impossible to just “keep lending” because the non-financial, tangible side of the market was in a mess. There were simply very few credit-worthy prospective borrowers out there. These are complications Friedman couldn’t have foreseen, because ultimately, his theory was of how the Great Depression could have been managed was a simplified “alternative universe” scenario. The world is much more complex than even the most towering of geniuses can imagine, when events unfold in real time.