Bad ideas blown away by Milton Friedman 19

A young idealist has a formula for ending poverty and achieving economic equality: 100% inheritance tax  and redistribution of wealth by government. He thinks – as the Left does – that there is a fixed quantity of wealth in the world – “the capital” he calls it . (Why can’t or won’t the Left understand that wealth is created?)

Milton Friedman explains how the formula would destroy a society.

And here he talks – inter alia – about the importance of limiting government power to preserve the freedom of the individual.

Posted under Commentary, Economics, education, Socialism, Videos by Jillian Becker on Saturday, November 23, 2013

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This post has 19 comments.

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  • rogerinflorida

    I hesitate to join such august company, who obviously know so much more about economic theory than I do, but I may have something of use to add. Firstly the discussions between the economic experts remind me
    somewhat of this (TIC):

    I think that economics is actually quite simple, but economic analysis can
    be extremely complex. It is necessary to first determine what it is that
    we want the economy to do, this is the arena of politics. When I read the rants of utopian libertarianism; against govt., regulations, taxation, etc. I can only conclude that they believe there is nothing wrong with the economy that cannot be fixed by more polluted air, more poisoned waterways, more homeless families and more starving children. Libertarians seem
    unable to grasp that the regulations they complain about came to be because of the cruelty, injustice and out and out short sighted criminality of the laissez faire economy.
    Hair splitting about what economic theories are best ignores the truth; which is that political realities have little to do with economic theories. Some years ago, during the Clinton administration, James Carville, the political operative made the observation that “If you drag a $100.00 bill through a trailer park” you can get anything. Well, he was right to some extent of course but as US society is at the lower end so it is at the highest levels: Drag $1,000,000.00 through Congress and you can buy new laws, exemptions from existing laws and special favors of all sorts. Drag a few $billion and you can have the US military as your personal bodyguard (KSA). There is no economic theory that can account for such amorality.

    The next few decades are going to be fascinating for those of us who are interested in “money” as a concept. The US now has a debt level that is clearly beyond repayment; if the US Federal govt. were to live within it’s $2.7 Trillion revenue and set aside a small be but significant amount (say $500million/year) to retire the long term debt, we could be pretty much debt free in about 30,000 years, this is not going to happen. The fact that the Fed is purchasing some $85 billion a month of bonds tells us that the normal tripwire of insolvency; the failure of bond auctions, has been passed. We also know that expenses are increasing as more demands are made on SS, Medicare, Medicaid, welfare, etc. Also that military expenditures, particularly through the VA to cover the huge costs of medical treatment of wounded soldiers are going to continue increasing. Taxes cannot be raised sufficiently to cover the costs, the costs cannot be reduced because that would be politically impossible, QE forever.
    For interesting takes on this:
    http://www.realclearmarkets.com/articles/2013/11/25/dangerous_collective_delusion_at_the_fed_100758.html
    and:
    http://market-ticker.org/akcs-www?blog=Market-Ticker

    The videos of ProfessorFriedman are very interesting; in the first video a couple of things stand out. First is his clear belief that family is the bedrock of our civilization, I would go further, it is the spine of our civilization, destroy family and you destroy the society, Marxists know and understand this.
    Second is the vacuity of the Ivy League (?) audience, at 2.54 he says “the effect of the 100% inheritance tax is to encourage people to dissipate their wealth in high living”. This elicits derision from the audience; “what’s wrong with that”. I wonder where that young man thinks the money to pay for his education would come from if his idea of 100% IT was implemented.

    That is enough for now, must get some work done.

    • The Burro

      Reminds me beautifully of the debate at university twixt the Marxists and Socialists. The Boss Marxist, Bob Rowthorn, is now “Baron Rowthorn”. Can’t keep talent down!

      In Cambridge where much of the 20th Century Keynesian material started the scruff from the People Judean Front would have been what all those lovely Socialists aimed for – to “be working-class”. Damn funny world, eh?

  • The Burro

    My dear “L” what the “L” is going on? Friedman, a Socialist? Maynard, a Communist? Tut, tut, much too strong, much too aggressive. Let us talk, Burro to man.

    Friedman NEVER supported the Central Banks (CB) as the arbiters of money production. He explicitly stated he wanted to get rid of the CBs on numerous occasions. See http://www.themoneymasters.com for enlightenment and a most easy-to- read summary of his position.

    Friedman worked in two worlds. One reality, where CB existed and the other, the ivory tower, where he could start with a clean slate and design a new society without those pesky politicians. It does seem you confuse his words, not to mention his policies, as well as perhaps misunderstand his works. So let us exchange ideas, and after all, it seems you are an Austrian School man and I would hate to lose a fellow traveller.

    In Friedman’s reality mode he was a constant critic of impediments to the free market but realized the world did have them. Therefore he did seek ways to minimize these while moving inexorably towards the optimal position of “limited” government – see the videos on the Atheist Conservative.

    In the Ivory Tower, he repeatedly attacked the impediments and NEVER advocated inflation. In fact, in the very work you reference with “4%”, this was SPECIFICALLY intended to prevent the poison of inflation. See “A Program for Monetary Stability”, 1960, which is the piece coming out with a fixed expansion of the money supply not at 4%, which was merely an afterthought in many ways but “k%” – hence the economists’ Friedman-K rule. Why 4? well, Friedman and Shwartz, did this monster study (it is huge, believe me I had to read it 40 years ago) of the “Monetary History of the United States”. In it, they did find agreement with you that the CB were total rabble and caused all manner of problems. But – the demand for cash and other calls on the need for liquidity within an economy an in the United States, necessitated an expanding money supply to prevent deflation and thus economic collapse. For the US this was 4% per annum, he conjectured. Later work by Milty covered the dual-hump lagged effect for the impact of money supply changes foreseen in his monster book and this simply amplified the need for a fixed rule. Uncertainty was just too great to try to “manage” the economy as swings would be amplified. As Milton said to me himself, “Money is much too serious a matter to be left to the Central Bankers”, thereby quoting Clemenceau, who was sadly, a Frenchman among his other faults. Milty advocated a computer program to ensure the money supply would expand this 4% annually. Doesn’t sound like support for the CB to me.

    Now I have no wish to offend you “L” old mate, but I am going to tell you a secret. Maynard the Keynes man reached the same number and conclusion on policy!! This was from a totally different starting point in thinking but just a gem for you. But really, Maynard, a Communist?

    I did not meet Maynard but was taught by HIS teachers and most of the people who gave him the important ideas which culminated in the General Theory in 1936. I did not find a single Communist among them. Bender, boozer, belly-dancer, womanizer (rarely), odd-ball, profligate, yes, but Communist – no. Indeed, the Cambridge Keynesians, not to mention the outgrowth, the Italian Neo-Keynesians led by Luigi Pasinetti (another of my teachers), and the American Samuelsonians do not appear to be at all Communists. Munby, the late and wonderful King’s College librarian like to state they all had vices he could respect, “Boys, booze and betting” and in Luigi’s case, an odd preference for English fish and chips as opposed to Italian food. Communism – alas no.

    Milty brought back to the centre of importance the concept that “money matters”, while Keynes essentially marginalised it in 1936 with his “liquidity-trap” rendering it ineffective as a policy tool. Actually, to be precise, it was John Hicks and Alvin Hansen with their “Hicks-Hansen” analysis who really came up with the pushing on a string, liquidity trap ideas.

    So let us now address your impressions of the collapses in free enterprise caused by fiddling with the money supply. While I, Maynard and Milton would agree with you on most causes of the crashes in the economy lying at the door of the government-run money controller, I think you must not underestimate the free market’s ability to whack your kisser if you do not listen to it. Contrary to your statements on the Depression (that is from 1929 to 1934; the Great Depression lasted from 1815 to 1876 in England)) recent research has indicated that political influence of a more subtle kind was at work.

    Let us begin in 1929. A relatively mild recession in agriculture grew more nasty in the year. Vast overvaluations in the stock market led to a collapse. But from 1929-1930 the slump was not so great and indeed the stock market had a pronounced recovery in 1930 and unemployment which had risen actually started to go down. After jumping from 5% in 11-29 to 9% in December 1929, it fell to 6.1% in October 1930! Not exactly what most persons know, eh?

    Well the pesky politicos got involved and Hoover tried every which way to keep up real, productivity-adjusted wages. At the same time, the politicos passed the Smoot-Hawley (June 1930) Tariffs. The increase in tariffs had been anticipated by foreign entities and governments which retaliated immediately or before it passed and had the effect of slashing trade exports and raising real productivity-adjusted wages. In 1930, money wages fell 2.1% and consumer prices 2.5%, but output shrank 4% causing a big productivity fall and thus real-wage increase. Labour was too expensive!

    Now came the whack on the kisser. With compensation too high, business normally begins to slash costs. But political pressure largely prevented this, and the situation got progressively worse. In 1931 productivity rose 0.9%, while money wages fell 3%. Prices fell 8.8% so real wages leapt. Businesses were getting destroyed by loss of margin, and commenced to lay off workers. In addition, with excess capacity developing in most businesses, investment was reduced ie it was reduced for “Smithian “ reasons or a capital stock too high for output plus business had to prop up cash flow to survive A huge leap in unemployment took it from 6.1% in 1930 to 19.8% in December 1931. Then it got worse!

    Business had not reduced costs in either 1930 or 1931. It had simply cut variable costs in line with output or prices, but in 1932 it HAD to act and it did or go broke. Money wages began to fall and did so 7%. Productivity fell 3.8% but prices 10.3% – so real wages again rose – in 1932 with unemployment going from 19.8% to 22.3% having reached 27.9% in September 1932!

    1933 brought business to where it was now acting aggressively to cut costs and real wages. By the first quarter of 1933 money wages were being reduced faster than prices and productivity was stabilizing or rising – real wages were starting to fall. History has shown that Franklin Deluded Roosevelt took the White House on March 1933 – the very bottom of the crash. Great timing I’d say.

    In the period 1929-1933 money policy was largely a follower of events rather than a leader or producer. Real wages ROSE in the face of huge unemployment by around 22.5% in this period which was great if you had a job, but much of this was due to price falls and wage rigidity. These issues may reflect long-term influences of money supply adjustments but it is clear the FED was at best bungling and perhaps more realistically incompetent in this period. Out-to-lunch may be best, but political influences can be clearly seen in the data. For verification of the statements above, please see Vedder & Gallaway, Lebergott, Coen and Darby.

    What stopped the depression? Well, after liquidating capital, a bottom was reached in March 1933. Business HAD to buy new equipment or shut down – demand rose. Then, expansion led to rising productivity, and wages did not jump with prices stabilizing after the markets had cleared. Real wages fell – people priced themselves into a job. And then, the money supply expanded providing capital to finance the expansion – not from the Fed – but from Jews!

    See Roemer’s article on the flood of capital from Europe which lifted the US economy as the Jews removed assets and gold from Europe to the US. It was only in 1937 that the ludicrous actions of Roosevelt “to balance the budget” and the Fed “to raise interest rates to prevent a speculative boom” halted the expansion. By then, unemployment which hit 28.3% in March 1933 was down to 12.3% in May 1937.

    So where does all this lead us? I think “L” and I can agree the root cause of all the problems is really “government”, against which essentially ALL of us believe should be cut back, chopped, reduced etc, and its influence eliminated in many area. As regards the Fed, Milty did say, abolish it. Even Keynes was against massive government and railed against it to his colleagues and one in particular Joan Robinson. Joan was prone to saying “Maynard would never have said this” regarding expanding government spending without curtailing it in a recovery, but to describe her and Maynard as Communists, well……………… a little harsh. Joan made a great cup of tea incidentally……………………….

    So there you are “L”. Something to munch on with your turkey.

    Keep the faith, and I do agree – the Austrians are right. But which School? Bohm? Menger? The Finnish lot? The Swedish lot? Hayek was more a political philospher than economist, and Mises? Machlup? Haberler? And let us not forget perhaps one of the most insightful of all the 30’s economists, Kalecki, who gets no attention at all but addressed the issue of distribution of income head on (and was a great friend of Joan’s above)

    The Burro

    P. S. The stock market fell from 381.17 9-3-29 to 41.22 7-8-32 and then doubled in 1933.

    • rogerinflorida

      That’s a keeper!

    • Don L

      Hi there The Burro. Given the name dropping and academic declarations, you’ve apparently spent a great deal of time in and about the economics world…just curious, would that be mostly in the UK?

      Me, well long-to-short, for all intents and purposes, I’m just a retired cabbie as it were. In early (phew) 2001, I took advantage of an opportunity to sell my car service and tour company…the buyer suffered serious losses due to 9/11. At that same time, my mother suffered a number of mini strokes and I wound up caring for her until her passing in 2004.

      Now, in those days there was a plethera of Red/Green Light stock trading software infomercials airing on TV. In late 2005 I wound up attending one of the selling sessions…I recognize snake oil when I sees it! Yet, I online queried whether or not there was credible software that could actually do this trading analysis…I found some and spent several years making a nice living trading 3 & 5 minute real time charts…loved the e-minis and overnight action. Then the health issues came on with a vengeance and not only was walking a problem, merely sitting upright had outrageously nasty repercussions…trading ended.

      So, during my trading days, I used to have CNBC on in the background to keep an ear to the street. FOMC wednesdays and CNBC’s Steve Liesman & Rick Santelli (who gave the Tea Party its name) stimulated me to attempt to grasp ‘economics’ (Liesman would wet himself every time he mentioned Greenspan or Bernancke and I couldn’t get over that our economic system hinged on one guy, The Chairman, and the words he spoke…seems absolutely insane. My exposure to economics was an econ101 class back in ’70…I did ace it but it was merely memorization as it was, as they say, greek to me.

      As I ventured into ‘economics’ I stumbled upon something called Austrian economics…Huh? something from the nazi days? And, the scrawny old guy was named Ludwig von Mises…cartoonish: Mises to pieces and Ludwig? None the less, I was fascinated. This Austrian economics made sense. It provided answers, analysis and explanations that filled in the holes and exposed the deceptions, obfuscations and lies about our economic system and why the country has fallen to its knees with the domestic enemy in the white house.

      I did not get a degree in economics. I did not attend Harvard, let alone Cambridge. I’ll attempt to post a photo of my little library. I dare say, I have at least read and tried to comprehend the topic of economics a bit more than the general public. Oh, I don’t even know, nor have I met, any economists; celebrity or otherwise. But, my meeger readings have brought me to some conclusions based on my knowledge, as it is, of the Austrian economic principles.

      First, the market knows best and there is no such thing as an untrustworthy market; the market IS…errors and all; markets are self-correcting and self-balancing. That uncertainty is the very nature of free markets because predicting the future is impossible. That Austrian principles always prove correct because they are based on reality and other schools are always failing as they attempt to impose an absurd notion of “should”. Mises 1st principle was economists are duty bound to tell government what it can’t do!

      second, markets are comprised of millions upon millions of people all acting in their self-determined best interests. That in free markets both sides win. It is when government enters the transaction that buyers and sellers loose and the government takes. That the decisions that merely go into a pencil are into the billions ( http://www.fee.org/the_freeman/detail/i-pencil/ ) whereas the contemplation that usurping market determinations is even possible is an act of insanity. Even a computer program must have data entered…made up inputs and pretend desired outcomes/controls in the trillions based on demonstrably false concept that bits of economic history can predict future market behavior. Mises “The Place Of Learning In Economics, Hayek’s “A Free Market Monetary System and The Pretense Of Knowledge” are two little booklets that irrefutably expose the ‘Science Envy’ of mainstream economics and of the scam, sham and fraud that economics has become.

      My point, and I don’t want to be condescending or insulting is that your buddy Milty was the product of bad mumbo jumbo. Ivory tower or reality makes no never mind. You typed “…where he could start with a clean slate and design a new society without those pesky politicians.” There in lies the problem…ONLY the market, human beings interacting freely and willingly, determine society. Where does anyone get off believing they (which means government backed by the threat of force) can design a society. This notion more than anything else, like religion, has destroyed more lives as Milty-types try to remake the world according to their ego-fed idiosyncrasies (how is he no different than a politician with the same I know best attitude?) . Milty’s limited government still includes the computer program managing society…doesn’t it?

      Now, the percent k: 4% or 000.2%…any percent is BS. Inflation is defined as an increase of the money supply, from what I’ve read/eked out…not just increases in consumer prices. You typed “But – the demand for cash and other calls on the need for liquidity within an economy an in the United States, necessitated an expanding money supply to prevent deflation and thus economic collapse.” — all caused by the fraudulent practice of fractional reserve banking in the first place. Do away with this, return to a gold standard and the problem goes away…which seems to be the consensus of the Austrians I’ve read. Milty advocated a computer program, you say, to ensure the money supply would expand this 4% annually.” expanding the money supply is in itself inflation and will in time result in a crash…I accept as true the Austrian Business Cycle Theory…no one has yet refuted it. It holds up.

      An interesting T-shirt I saw read “Keynes Must Die If America Is To Live!”. He and Marx have destroyed untold amounts of wealth and ruined millions of lives with their ideas. Admitting that Maynard’s teachers were yours…Is that a good thing? He sure got it all wrong! Now, communist…I lump him in with all the fools of the 30s: progressives, Fabians and the other utopians. This guy Keynes was some english FOB, rumors of some sexual deviance, trying to surpass his father, a fast talker who made up an economic theory that holds no water and succeeded only because it fed the egos of the pretend Science Envy jerks and gave politicians cover to tax and spend. Was he a communist…perhaps not in the purest sense. But I doubt he would object to government running the means of production as long as consumers were forced to spend. C’mon…in his latter days he even admitted he’d made it up…I read somewhere. That anyone implements or gives credence to his ideas…run ’em outta town!

      A great read and the best book ever written, well documented, toward a definitive explanation and comparison of communism and fascism is Jonah Goldberg’s “Liberal Fascism”. Sans full review, socialism = fascism, communism and the 3rd way compromisers. The differences, based on the historical record of application, between fascism and communism is basically only on two points: communists think world wide and government outright ownership of the means of production and Fascists limit control to the individual state and control of production by regulation, statute and other political means…backed by force. This is why commies and fascists always fight…they are after the same audience! The 3rd way folk fool themselves into believing there’s something called a little bit of socialism…there isn’t. Socialism will always evolve into one of the other ideologies and then to collapse.

      Given this definition and Milty’s idea that interference with the means of exchange by CB or computer modeling is by definition socialistic and falls toward the fascistic side as he isn’t advocating government ownership of enterprises…merley controlling them by screwing with the economy’s means of transacting…the money…according to erroneous logic…whereas, that he thinks he can!

      It amazes me how those who consider themselves wise are so friggin’ ignorant. Such grandiose notions of “I know best”. The delusional mental gymnastics, the wrongful application of mathematical modeling of things past as vision of the future and measuring the immeasurable to create indexes and tables of segmented and static data that fail to incorporate the dynamics of everywhere ongoing and simultaneous action with totally unknowable impacts for the future amazes me. Mainstream economists come up with excuses such as uncertainty, animal spirits, externalities and other wrong minded ideas merely to support their fraudulent pseudo profession. Like lawyers there are too many economists (I’m speaking mainstream). Mises was correct whereas he states economics is a social science requiring thought…not a hard science where things are measurable and predictable.

      I’ve rambled enough. Thanks for responding, but be advised, I cannot accept, unless you can refute Mises, Hayek, Rothbard and other Austrians as to the business cycle, the impact of interference, bureaucracies, etceteras. I know you rambled off all kinds of this was that and that was this as to depressions and recessions. I’ve seen this argument type in many of my readings and they all are mere rumblings of those who just will not accept that sticking fingers in the pie isn’t a good thing. Screwing with the money is always and singularly bad and the base cause of economic failures…based on my taxi driver interpretation of the material I’ve read.

      Later there The Burro. Just curious…are you in anyway related to Jillian? This has typing has pooped me out…I will be paying a price. I’ve enjoyed it though Burro. Please Have a wonderfull T-Day and stay healthy.

    • Don L

      I only Just came across this article by Murray Rothbard…His credentials as an Austrian appear in order. I don’t mind having him defend my thoughts about Friedman: http://mises.org/journals/jls/16_4/16_4_3.PDF

      • The Burro

        Couldn’t get back to you earlier as I was off maximizing profits. Watch out for Rothbard – he is at his core an anarcho-capitalist and takes his ideas to ludicrous lengths – supporting child molestation for example. Also, I have read just about all of his works and find his histories – esp. of 1819 & 37 very poor. Further, he came from the influence of Herper, Spooner, Tucker & Molinari. Whoa! Talk about making your hair stand on end! These guys are crackpots. Next, his treatment of Fritz Machlup was despicable on any dimension and Mises was the same – Mises refused to talk to FM for 3 years after FM stated he saw a use for flexible exchange rates – thereby possibly negating the gold standard of fixed gold values. I believe I recall Friedman the well known Communist, sorry Socialist, was at that meeting and took notes that led to the story. I am sure the Socialist was fibbing for a good story…………..

        Get a life boys, stand up and take a breath, and loosen up!

        Last of all, if you want to see just how insane Frothy is (that was Rothbard’s pet name from his wife) take a gander at Economic Thought Before Adam Smith. Did you know Smith was a Marxist? Eh, I’ve heard this before………I recall ,,,,,,yes..Friedman was a….. Socialist!

        Next to last of all, Rothbard does love to use loony English in his work. Almost philosopher standard eg Praxeaology. Oh Brother! I deal in an America where 25%+ can not read or write properly – and we expect them to understand praxeology, eh? How about “equally rotating equilibrium”? Yahoo!

        More to come. Must dash, high yields are calling me.

        P. S. Bohm-BaWerk was a great Austrian but his writing is a nightmare. Fritz Machlup wrote several items re: the A’s and is indeed recognized for his clarity but was treated with contempt by Ludwig and Frothy.

        P. P. S. If you wish to be in touch with a group which is Austrian but a bit on the anarcho – C side, try the Independent Institute in Oakland California. Yes – Oakland, the land of civilized, courteous behaviour, with no racial biases whatsoever, especially from the “City Leaders”.

        The II has some great tomes. If you subscribe you can get Vedder & Gallaway free. What a superb tome that one is!

        Stay well and watch out for those pesky economists.

        The Tired but Wealthier Burro

  • Don L

    Not So Fast. Friedman is like a religion…in fact his is called the Chicago School of economic thought…whereas 90% of what is offered is reasonable and true; it’s the remaining 10% that’s total crap and results in the misery of millions. In Friedman’s case it is that he beautifully defends and advances the ideas of free-market capitalism and then ironically, contrarily, erroneously and deleteriously insists on the government centrally planning the monetary system through a fractional reserve central banking scheme in order to purposely impose chronic inflation. This is madness.

    Although he only wants inflation to be about 4% per year…any inflation ultimately results in a crashed economy as imbalance of investment occurs; because wrong signals of available capital and consumer purchasing power are transmitted to producers. Additionally, while marketplace innovations would result in decreasing prices to consumers, intentional inflation eats these consumer price savings up. Indeed, inflation decreases the value of life savings and property values as the value, especially fiat, money is degraded. Further, this inflation is a hidden tax on society and is counterfeiting where the new money is used to corrupt government/politicians and pay for the wars, pork barrel spending etceteras…CONTRARY TO FRIEDMAN’S WORDS, INFLATION IS UNQUESTIONED REDISTRIBUTION OF WEALTH.

    What has to be understood as the BASIC ERROR in reasoning is that Friedman actually believes that it is possible for an individual, a politician, a committee or commission, a chairman & board, a bureau or bureaucrat or likewise to actually be able to possess the knowledge and capacity to ‘expertly’ manage an economy; to control inflation— NOT POSSIBLE as history has notoriously revealed.

    To the point, Friedman whole heartedly supports the Federal Reserve. Irrefutably, it can be shown that the FED and its interference in the monetary system is the direct cause of every economic downturn since its enactment in 1913: including the Great Depression and the current Great Recession. Central planning is the consequent of the “Pretense of Knowledge Fallacy”. Like Nobamacare exchanges…pretend markets…the idea that usurping the billions/trillions of decisions made by millions upon millions of free and willing individuals interacting as buyers and sellers exchanging toward satisfying their own best interests (wants and needs) is an absurd impossibility. It is why all socialism fails. It is why NO CHICAGO SCHOOL economist has ever been right, nor has any economist not adhering to the Austrian school of economics, been correct in policy or projection. Excepting the Austrian school…all other economic schools of economics have a core predicated on some form or another of government planning…PERIOD.

    So, as iconic as Milton is as a capitalist, he in fact, by result of implemented policies, is a socialist. His brand of free enterprise is in essence fascism where government control of the money controls the markets/means of production without outright ownership…to their detriment. The democrats lean toward the outright communism of Keynesianism while the republicans hang on to Friedman’s brand of socialism…they can say free-enterprise even though it isn’t. Central planning, whatever brand, will always fail.

    • Jillian Becker

      You are of course absolutely right in all you say, if Friedman said what you say he said (“insists on the government centrally planning the monetary system through a fractional reserve central banking scheme in order to purposely impose chronic inflation”). Please give us a reference.

      • Don L

        Books: Harry C Veryser “It Didn’t Have To Be This Way; Kel Kelly “The Case For Legalizing Capitalism”; and others which don’t come to mind at the moment. All describe, rightfuly that Friedman believed in empirical/positive economics…the irrational notion that economics is like hard science and you can measure and thereby control the economy (that means like herding cats…he ca mathematically model peoples’ behavior toward control). But, just a quick search of “Friedman and the FED” revealed this little video where he discusses the purpose of the FED:

        Now, in this video he doesn’t specifically layout the arguments he has done for causing inflation toward some insane growth/money expansion model…but it can certainly be extrapolated from his arguments that the FED is even necessary and his denial that it isn’t government control (by proxy…even political).

        For Friedman’s school, and all the others, excepting Austrian, to be able to finally explain stagflation, the depression and today’s recession and other economic failures…they would have to admit their ideas are bogus. Friedman’s believe in the FED is erroneous and harmful…it fails to incorporate the effects of time and human behavior.

        T’were it not true that he does believe in the FED…his arguments against government planning and the benefits of a free-market capitalist society are right on. He could not understand that economics is NOT a hard science and his modeling (he did not accept all econometrics) was a picture of an instant (even if it was capable of being measured at all) and did not include the dynamics of time nor interaction of all markets all acting simultaneously.

        Oh…the FED is fractional reserve central planning. It is not unlike, since it is otherwise a fraudulent enterprise, the cosa nostrra commission…coordinating the theft of America’s wealth.

        • Jillian Becker

          All extremely interesting. To add to the interest, here’s “Hayek on Milton Friedman and Monetary Policy”:

      • Don L

        I will stand corrected on “insists”. I should have said promotes, believes, advances…thinks it is just a great idea.

        • Jillian Becker

          The Burro has replied to you above very fully – or rather discusses with you, Don L. He calls you “L”(not, I’m sure, with any reference to the L of my book).

      • Don L

        http://en.wikipedia.org/wiki/Monetarism

        FROM WIKIPEDIA:

        Monetarism is a school of economic thought that emphasizes the role of governments in controlling the amount of money in circulation. It is the view within monetary economics that variation in the money supply has major influences on national output in the short run and the price level over longer periods and that objectives of monetary policy are best met by targeting the growth rate of the money supply.

        Monetarism today is mainly associated with the work of Milton Friedman, who was among the generation of economists to accept Keynesian economics and then criticize Keynes’ theory of gluts using fiscal policy (government spending). Friedman and Anna Schwartz wrote an influential book, A Monetary History of the United States, 1867–1960, and argued “inflation is always and everywhere a monetary phenomenon.” Though he opposed the existence of the Federal Reserve [Added by Don L — He opposed it because he didn’t think they did it well] Friedman advocated, given its existence, a central bank policy aimed at keeping the supply and demand for money at equilibrium, as measured by growth in productivity and demand.

        Monetarism is an economic theory that focuses on the macroeconomic effects of the supply of money and central banking. Formulated by Milton Friedman, it argues that excessive [added by Don L — ‘excessive’ not none] expansion of the money supply is inherently inflationary, and that monetary authorities should focus solely on maintaining price stability.

        This theory draws its roots from two historically antagonistic schools of thought: the hard money policies that dominated monetary thinking in the late 19th century, and the monetary theories of John Maynard Keynes, who, working in the inter-war period during the failure of the restored gold standard [added by Don L — It didn’t fail it was obfuscated and outlawed by FDR], proposed a demand-driven model for money, which was the foundation of macroeconomics. While Keynes had focused on the value stability of currency, with the resulting panics based on an insufficient money supply leading to alternate currency and collapse, then Friedman focused on price stability, which is the equilibrium between supply and demand for money.

        The result was summarized in a historical analysis of monetary policy, Monetary History of the United States 1867–1960, which Friedman coauthored with Anna Schwartz. The book attributed inflation to excess money supply generated by a central bank. It attributed deflationary spirals to the reverse effect of a failure of a central bank to support the money supply during a liquidity crunch.

        Friedman originally proposed a fixed monetary rule, called Friedman’s k-percent rule [added by Don L — NEVER NOT ZERO or in any manner allowed to be MARKET DETERMINED], where the money supply would be calculated by known macroeconomic and financial factors, targeting a specific level or range of inflation. Under this rule, there would be no leeway for the central reserve bank as money supply increases could be determined “by a computer”, and business could anticipate all monetary policy decisions.

        Opposition to the gold standard: Most monetarists oppose the gold standard. Friedman, for example, viewed a pure gold standard as impractical.For example, whereas one of the benefits of the gold standard is that the intrinsic limitations to the growth of the money supply by the use of gold or silver would prevent inflation, if the growth of population or increase in trade outpaces the money supply, there would be no way to counteract deflation and reduced liquidity (and any attendant recession) except for the mining of more gold or silver under a gold or silver standard.

        [added by Don L — he believed that screwing with the money supply was a good thing…IT IS NOT and has been so proven economic failure after economic failure!]

    • Kerry

      Friedman’s tromp through Central and South America after “winning the cold wars” in several countries, were abominable. Likewise his group set up shop in Russia after the fall of the Soviet Union which helped lead to the creation of the oligarch’s. Yes they were now PRIVATE enterprises….come on! Don, I was so pleased to read what you wrote. As a capitalist and free enterprise advocate, I have always been disturbed by my conservatives compatriots who unquestionably supported Uncle Milty in the past. He needs to be called out for the realities of what his proposals have wrought, and not on the sound bites. Thanks

      • Kerry

        I might also recommend Naomi Klein’s book, “The Shock Doctrine: The Rise of Disaster Capitalism.” She does an excellent job of explaining the 10% you spoke of.

        • Jillian Becker

          Naomi Klein? Gosh, Kerry, I thought you were on our side!

          • Kerry

            I AM I AM, but I think there is always something to learn in reading those you may disagree with. When I was a christian apologetic, I only read those I agreed with ands so I have changed my input methods. While I certainly do not agree with everything she wrote…as she takes great leaps of logic at times both chronologically and from her typical leftist bias….but I think she makes other valid points. I know the situation in Russia well and believe she did a pretty good dissection on that as it relates to Uncle Milty. As for the Pinochet overview, I believe e she is less accurate albeit provocatively interesting.

            Along the same lines, I am familiar with Perkins and “Confessions of an Economic Hitman.” This is WB and IMF and USAID all rolled into one. His observations and conclusions are most thought provoking and as one who knew firsthand the consequences of working with these organizations, I give him credit for his candor.

      • Don L

        Interestingly, while he and the other republican econs were screwing up the former soviets…the Estonians, Latvians and Lithuanians were adopting Austrian principles…take a look at their records.

        Indeed, Austrian principles were adopted in Germany after WWII…it was not the Marshall plan. The Marshall plan, and all other foreign aid, did no good anywhere else.