Overwhelming evidence

Milton Friedman didn't like too much money. But he also didn't like too little money. In chapter 2 of Money Mischief he wrote:

There is strong evidence that a monetary crisis involving a substantial decline in the quantity of money is a necessary and sufficient condition for a major depression.

Insufficient money can cause a depression. If the "monetary base" grows too slowly it can cause a major downturn. That happened twice in the past hundred years:

Graph #1: Growth Rate of the Monetary Base
The downtrend before the Great Recession runs from 2001 to 2008
This graph is from 2014, when each series at FRED could have its own start- and end-date.
This graph replaces mine from 10 Feb 2021.

 

Graph #2: Federal Debt 1970-2023 and the 2001-2023 Exponential Trend
From mine of 7 March 2024
The "below trend" data before the Great Recession runs from 2004 (or before) to 2008-09.

Graph #3: The Quantity of Transaction money per Dollar's Worth of Output
The low before the Great Recession runs from 2004 to 2009.

Fiscal and monetary policy cooperated, creating a substantial decline in the quantity of transaction money, from the record low of 2000-01 to a level at which our economy could no longer function.

 "... substantial decline in the quantity of money is a necessary and sufficient condition for a major depression."

The evidence is overwhelming.