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What would Milton Friedman do now?

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Re: What would Milton Friedman do now?

#11

Post by billswift »

bjnortier_hn wrote: post #7

If you watch his "Free to choose" series ( http://www.ideachannel.tv/ ), Friedman blamed the Fed for the depression because they didn't keep the money supply stable. Because of bank failures the money supply decreased by a 3rd. He never advocated massively increasing the money supply. In fact, he has been consistently against printing money because of it's leading to inflation. You can interpret his comments on the B…

If you read several of his books, you will understand that he believed in both. Money supply is the most important influence on the systemic level; but his belief in money is largely a belief in trying to keep things steady so the economy is reasonably predictable for individuals participating in it.

Re: What would Milton Friedman do now?

#12

Post by jbooth »

pierrefar wrote: post #3

"The Friedman logic, though, makes the case for QE2." but only just after going through uncertainty and points against. The way the article is written sounds like the author wanted the conclusion regardless.

Well, I'd hope it was after going through uncertainty and points against. Otherwise, how do you know if the idea's any good?

Re: What would Milton Friedman do now?

#13

Post by bjnortier_hn »

nerfhammer wrote: post #10
bjnortier_hn wrote: post #7

If you watch his "Free to choose" series ( http://www.ideachannel.tv/ ), Friedman blamed the Fed for the depression because they didn't keep the money supply stable. Because of bank failures the money supply decreased by a 3rd. He never advocated massively increasing the money supply. In fact, he has been consistently against printing money because of it's leading to inflation. You can interpret his comments on the B…

Sorry, I don't think that is accurate. Quoting wikipedia: "[Friedman] claimed that, if the Fed had provided emergency lending to these key banks, or simply bought government bonds on the open market to provide liquidity and increase the quantity of money after the key banks fell, all the rest of the banks would not have fallen after the large ones did, and the money supply would not have fallen as far and as fast as…

Which Wikipedia article?

There's a difference between propping up a failing bank (which I believe Friedman would be against) and providing liquidity to the banking system when a bank run occurs on a well-capitalised bank (which I believe he would support).

If you watch the Volume 3 "Anatomy of Crisis" about the depression, when a run on the Bank of the United States occurred despite it's being a sounds entity (when it was liquidated it paid back 92.5 cents on the dollar). It's failure created a domino effect according to Friedman. So he supported providing liquidity in that scenario.

I don't believe Friedman would support QE[2] when the banks are well capitalised. My interpretation of his ideas is that he supported a stable money supply, and Friedman was definitely against printing money in general.

That being said, the ideas I'm referencing were expressed in a time when inflation was a big problem.

I wish he were alive today, I would be very interested in his opinion.

Re: What would Milton Friedman do now?

#14

Post by nerfhammer »

bjnortier_hn wrote: post #13
nerfhammer wrote: post #10

Earlier quoted context omitted.

Sorry, I don't think that is accurate. Quoting wikipedia: "[Friedman] claimed that, if the Fed had provided emergency lending to these key banks, or simply bought government bonds on the open market to provide liquidity and increase the quantity of money after the key banks fell, all the rest of the banks would not have fallen after the large ones did, and the money supply would not have fallen as far and as fast as…

Which Wikipedia article? There's a difference between propping up a failing bank (which I believe Friedman would be against) and providing liquidity to the banking system when a bank run occurs on a well-capitalised bank (which I believe he would support). If you watch the Volume 3 "Anatomy of Crisis" about the depression, when a run on the Bank of the United States occurred despite it's being a sounds entity (when i…

Quote is from en.wikipedia.org/wiki/Great_Depression

Re: What would Milton Friedman do now?

#15

Post by [deleted] »

CWuestefeld wrote: post #8
bjnortier_hn wrote: post #7

If you watch his "Free to choose" series ( http://www.ideachannel.tv/ ), Friedman blamed the Fed for the depression because they didn't keep the money supply stable. Because of bank failures the money supply decreased by a 3rd. He never advocated massively increasing the money supply. In fact, he has been consistently against printing money because of it's leading to inflation. You can interpret his comments on the B…

I don't understand the downvote for this (so I voted it back to 1). Generally speaking, the idea expressed here matches my own understanding (though I'm more specifically familiar with Hayek and Mises). Can anyone explain why bj_nortier_hn is wrong?

[deleted]

Re: What would Milton Friedman do now?

#16

Post by fexl »

joelmichael wrote: post #6

Friedman would definitely support the Fed's actions. Bernanke is a loyal Friedman acolyte. The "Helicopter Ben" reference comes from him quoting Friedman's term for creating money to prevent deflation: http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/200211... He credits the Fed's failure to do what it is doing now with causing the Great Depression in this speech: http://www.federalreserve.gov/BOARDDOCS/SPEECHES…

Friedman also conceived of income tax withholding and what he called the "negative income tax," now known as EITC. It does not surprise me that he would advocate Monetary Mischief as well.

The QE arguments are an example of magical thinking. Incomes are falling, so increment some numbers in the memory of a computer and that will fix it. Never mind the realities of Human Action.

Real incomes rise when people become more productive, and that happens when they have more and better tools (capital) at their disposal and more incentive to produce. No one achieves that by printing Monopoly money.

"Each dollar the Fed prints has less oomph." Yes, they are pushing on a string, and those dollars do not impress me. To those who feast at the government trough, may you eat dollars!

Re: What would Milton Friedman do now?

#17

Post by binarray2000 »

Enough about John Maynard Keynes. We can be sure the 20th century British economic giant would advise more government spending to spur U.S. economic growth with consumers and businesses so hesitant and short-term interest rates at zero.

Indeed, enough... we don't want to be remembered anymore that he would advise us to save money in good times so we can spend it when the times get bad. And we're spending it in both good and bad times.

Re: What would Milton Friedman do now?

#18

Post by joelmichael »

fexl wrote: post #16
joelmichael wrote: post #6

Friedman would definitely support the Fed's actions. Bernanke is a loyal Friedman acolyte. The "Helicopter Ben" reference comes from him quoting Friedman's term for creating money to prevent deflation: http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/200211... He credits the Fed's failure to do what it is doing now with causing the Great Depression in this speech: http://www.federalreserve.gov/BOARDDOCS/SPEECHES…

Friedman also conceived of income tax withholding and what he called the "negative income tax," now known as EITC. It does not surprise me that he would advocate Monetary Mischief as well. The QE arguments are an example of magical thinking. Incomes are falling, so increment some numbers in the memory of a computer and that will fix it. Never mind the realities of Human Action. Real incomes rise when people become mo…

EITC isn't really the same thing as the basic income/negative income tax. The basic income has no means test whatsoever, whereas the EITC does. Check out the wiki on it. Also, most economists support the basic income as the ideal system of welfare (as confirmed in the article this thread is about), and it is intended to replace all other forms of welfare, including Social Security and Medicare.

Tax withholding was done during WW2 and before Friedman had changed his views considerably. But monetarism is his crowning achievement, it is what he is best known for, and where he was most influential. Friedman beat inflation and solved the mystery of the Great Depression.

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