Eugene Fama's predecessors in error. The "Treasury View." From G.C. Peden (2004), Keynes and His Critics, p. 80:
F.W. Leith-Ross to Sir Richard Hopkins and P.J. Grigg, 3 April 1929:
Before the government can give increased employment it must obtain resources.... Unless the government is prepared to... bring about an inflation... [it] can only obtain [resources] by taxation or borrowing.... The proposal that we are examining is that all the money required is to be borrowed.... When the Government borrows, it enters the money market as a competitor with all other enterprises.... The resources from which the government must draw... are the savings of the people.... But it is precisely on these that industry relies on.... The competition of the Government with private traders by means of large Government loans would not (apart from inflation) increase the resources available for the employment of labour. It would only mean that a portion of these resources would be directed by the Government instead of being directed by private persons...
Fama, actually, is much worse than the British Treasury economists of the 1920s. They acknowledged that monetary policy could affect the level of employment--could do more than shift resources from one use to another. Fama's argument based on his misinterpretation of the NIPA savings-investment identity has the implication that monetary policy cannot affect the unemployment rate either.
See R.G. Hawtrey (1925), "Public Expenditure and the Demand for Labour," Economica 5, pp. 38-48.