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Strategies & Market Trends : Heinz Blasnik- Views You Can Use
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To: GraceZ who wrote (2476)6/13/2003 7:52:02 PM
From: Don Lloyd   of 4909
 
Grace,

He's not saying that the quantity of money doesn't matter he's saying using money supply targeting hasn't worked [to engineer the economy]. It doesn't surprise me though that almost everyone would misread that statement.

Friedman should have stuck with what he originally said which was that the money supply should grow at a low fixed rate protected from policy tinkering.

It DOES surprise me that such an absurd misreading would occur.

I doubt that there is much empirical historical evidence that any such money growth targeting ever was tried, so any regrets that Friedman may have would be the result of difficulties, both technical and political, in trying to carry out such a policy, not that such a policy wouldn't have been a huge improvement over historical reality if it could have been carried out.

The real problem with Friedman's recipe, is that it can be used as a justification for adding salt at all, with the cooks then paying no attention to restricting the amount of salt they add.

Since the primary real purpose of increasing the money supply is to finance the expansion of government without the need to levy explicit taxes, there was never any chance that Friedman would be pleased with the result.

The secondary real purpose is to try to synchronize economic cycles with political election cycles, to the hoped for advantage of the party in power. This has been far less successful than expanding the government.

Regards, Don
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