Friedman attacks the notion that a private, free-enterprise economy is unstable by nature and characterized by recurrent boom and bust cycles that require government intervention. He says this viewpoint was common during and following Great Depression and helped spur New Deal policies. Friedman thinks the severity of the Great Depression resulted from missteps by the government, not market instabilities. He asserts that the Federal Reserve made terrible decisions concerning the money supply in 1930 and 1931, which turned a market contraction into a “major catastrophe” (38).

In Friedman’s view, Americans’ dissatisfaction with the commodity standard of the late 1800s contributed to a string of financial crises, which in turn led to the establishment of the Fed. A commodity standard is a system in which money is backed by a commodity, such as gold or tin. Since a commodity standard requires real resources, which are costly, it is usually accompanied by fiduciary money, such as an agreement stating that a person must receive the commodity in question according to a set of fixed terms. When the people in charge of the money stock circulate agreements such as these, less of the commodity needs to be kept on hand. Friedman says that once fiduciary elements enter the picture, there’s a tendency for “extensive intervention by the state” (41).