A Monetary History of the United States, 1867–1960 is a book written in 1963 by future Nobel Prize-winning economist Milton Friedman and Anna Schwartz.

The implication they draw is that changes in the money supply had unintended adverse effects, and that sound monetary policy is necessary for economic stability.

[3] Friedman and Schwartz were working at the National Bureau of Economic Research (NBER) when Arthur Burns, the future chairman of the Federal Reserve, suggested that they collaborate on a project to analyze the effect of the money supply on the business cycle.

[5][6] The book discusses the role of the monetary policy in the U.S. economy from the Civil War Reconstruction Era to the middle of the 20th century.

From 1923 to 1933, the authors argue that international trade was "sterilized" by the Federal Reserve inflating the money rather than immediately being settled by gold.

In the final chapter, they specify three occasions where the Federal Reserve acted strongly during relatively calm times and present these as an experiment for the reader to judge their thesis.

Friedman and Schwartz identified four main policy mistakes made by the Federal Reserve that led to a sharp and undesirable decline in the money supply:[7] The book was the first to present the then novel argument that excessively tight monetary policy by the Federal Reserve following the boom of the 1920s turned an otherwise normal recession into the Great Depression of the 1930s.

Previously, the consensus of economists was that loss of investor and consumer confidence following the Wall Street Crash of 1929 was a primary cause of the Great Depression.

Some editions include an appendix,[11] in which the authors got an endorsement from an unlikely source at an event in their honor when Bernanke made this statement: "Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve.

"[12][13]Monetarist economists used the work of Friedman and Schwartz to justify their positions for using monetary policy as the critical economic stabilizer.

This view became more popular as Keynesian stabilizers failed to ameliorate the stagflation of the 1970s and political winds shifted away from government intervention in the market into the 1980s and 1990s.

[15][16] In The Golden Fetters, economic historian Barry Eichengreen argued that because of the then internationally prevailing gold exchange standard, the Federal Reserve's hands were tied.

According to Eichengreen, in order to maintain the credibility of the gold standard, the Federal Reserve could not undertake actions (such as drastically increasing the money supply) in the manner advocated by Friedman and Schwartz.