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The Day the Banks Stood Still: Haiti, The United States, and Monetary Policy in the 1980s
Come 1980, banking in the United States and Haiti was in crisis, though, for very different reasons. In the United States, forty years of Keynesianism led to inflation, excessive lending, and rampant speculation. In Haiti, however, many of those same American banks, Citibank, etc., refused to lend, rejecting risks far smaller than those embraced in the United States. Both crises were inflationary. In the United States, banks lent beyond their means, in essence, creating too much money. In Haiti, banks hoarded Gourdes, forcing the state to print replacements. Although the underlying problems were opposite, monetary authorities in the United States and Haiti responded the same. At the insistence of University of Chicago Professor Milton Friedman, United States Federal Reserve Chairman Paul Volcker disciplined the banks by raising average reserve rates by 8 percent. In Haiti, Minister of Finance Leslie Delatour, a graduate of the University of Chicago, in turn, raised average reserve rates by 8 percent.
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