Milt Freidman talks about liquidity

Milt Friedman got a few things right. Here are quotes about the fallacy of rates, but the real subject is liquidity, why it flows and why it does not. When the Fed dominates the lending market with its monopoly power and low rates, it is disintermediating the banking system, reducing its ability to flow money. When it exits the market it leaves the short term lending business and allows private banks to reconstitute that network, that improves liquidity flow. Fiat bankers get mixed up, we dunno why and it may be because of their capital owners.

Here is Friedman on what he called the interest rate fallacy in 1997:

Low interest rates are generally a sign that money has been tight, as in Japan; high interest rates, that money has been easy.
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After the U.S. experience during the Great Depression, and after inflation and rising interest rates in the 1970s and disinflation and falling interest rates in the 1980s, I thought the fallacy of identifying tight money with high interest rates and easy money with low interest rates was dead. Apparently, old fallacies never die.

Freidman on Japan:

Milton Friedman: Yes, indeed. As far as Japan is concerned, the situation is very clear. And it’s a good example. I’m glad you brought it up, because it shows how unreliable interest rates can be as an indicator of appropriate monetary policy. The Japanese bank has supposedly had, until very recently, a zero interest rate policy. Yet that zero interest rate policy was evidence of an extremely tight monetary policy. Essentially, you had deflation. The real interest rate was positive; it was not negative. What you needed in Japan was more liquidity.
During the 1970s, you had the bubble period. Monetary growth was very high. There was a so-called speculative bubble in the stock market. In 1989, the Bank of Japan stepped on the brakes very hard and brought money supply down to negative rates for a while. The stock market broke. The economy went into a recession, and it’s been in a state of quasirecession ever since. Monetary growth has been too low. Now, the Bank of Japan’s argument is, “Oh well, we’ve got the interest rate down to zero; what more can we do?” It’s very simple. They can buy long-term government securities, and they can keep buying them and providing high-powered money until the high powered money starts getting the economy in an expansion. What Japan needs is a more expansive domestic monetary policy.