Why Did Milton Friedman Think a Modern Economy Needed Heavy-Handed Government Regulation in the Liquidity Services Industry and Nowhere Else?

he was confident that someday he or somebody else—maybe even me—would find a good, concise, convincing way of proving the point that a modern economy needed very heavy-handed government intervention in regulating the commercial banking industry but nowhere else. It was, he thought, something about the social waste of unnecessary bankruptcy, the catastrophic consequences of bank failures, debt deflation, and the fact that the price of liquidity services was intimately tied up with the units of account that we used to denominate our web of debt.