On 22 May 2012, the Rafael del Pino Foundation hosted the Master Conference "Who are to blame for the recession: capitalism and banks, or the economy and economists?", given by Timothy Congdon, Honorary President of the Freedom Association and Founder of Lombard Street Research.
Timothy Congdon argued that "One of the most important reasons for the current economic crisis lies in the fact that the rate of growth of the money supply, the level of bank deposits, has collapsed. During the years 2005, 2006 and 2007, the money supply rose by approximately 10% per year. In some countries, such as Spain, it increased even more than that. But from 2008 onwards, the money supply stopped growing, mainly due to pressure on the banking industry to recapitalise. The result of this pressure was a shrinking of the banking business and balance sheets. That contracted the money supply to the economy as a whole, which resulted in the present recession. My message is that we want a sound and adequately capitalised financial industry, but that process has to take place over a number of years. Recapitalisation must be gradual and, most importantly, it must not slow down the pace of money supply growth.
Timothy Congdon underlined the importance of the evolution of the money supply in achieving a return to growth: "In the long run, staying on the path to economic stability requires a steady growth in the quantity of money available, something repeated throughout his life by Milton Friedman and which seems to have been forgotten in recent years. Friedman was right and it was a mistake to have money growth rates of 10% across Europe six or seven years ago and suddenly to cancel that growth - something which, in the case of Spain, has meant negative money supply growth rates. This is a terrible mistake. We need constant rates of growth in the quantity of money. That means that the financial system has to be managed in such a way that the necessary recapitalisation does not hinder the growth of the money supply".