Milton Friedman Supported Quantitative Easing

Toro

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From the 1960s through his death in 2006, the dominant intellectual figure in Republican economic policy was University of Chicago economist Milton Friedman. He thought that the gold standard was nuts and that the Fed’s greatest failure was that it didn’t provide enough money to the economy during the Great Depression. While we don’t know what Friedman would be saying today, there is reason to believe that his views would be the opposite of Paul, Perry and many other Republicans.

We know this because Friedman commented often on Japan’s stagnation in the 1990s, that was very similar to the U.S. situation now. In a December 17, 1997, article in the Wall Street Journal, he gave this prescription for Japan’s problem:

“The surest road to a healthy economic recovery is to increase the rate of monetary growth, to shift from tight money to easier money…. Defenders of the Bank of Japan will say, ‘How? The Bank has already cut its discount rate to 0.5 percent. What more can it do to increase the quantity of money?’ The answer is straightforward: The Bank of Japan can buy government bonds on the open market, paying for them with either currency or deposits at the Bank of Japan, what economists call high-powered money.”​

With the Federal Reserve’s discount rate at zero, monetary conditions in the U.S. are parallel to those in Japan. Unfortunately, the low level of interest rates has blinded many economists to the necessity of further Fed action. As Friedman explained in his article, it is “misleading” to judge monetary policy by interest rates. “Low interest rates are generally a sign that money has been tight…high interest rates, that money has been easy,” he wrote.

I believe that if Friedman were still alive, he would be among the sharpest critics of Republicans’ attacks on the Fed. Perhaps his great stature would have been enough to keep them from going off in the wrong direction.
Fed Bashers: Take A Lesson from Milton Friedman
 

elvis

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We're all Keynesians now.
 

boedicca

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He also supported privatizing Social Security, so let's get going with that.
 
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If the Republicans win everything in 2012 - and I think they will - we could have a repeat of 1937.

We might have a repeat even if they don't.
 

elvis

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If the Republicans win everything in 2012 - and I think they will - we could have a repeat of 1937.

We might have a repeat even if they don't.
Is that when FDR quit spending and the economy tanked again?
 
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Toro

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If the Republicans win everything in 2012 - and I think they will - we could have a repeat of 1937.

We might have a repeat even if they don't.
Is that when FDR quit spending and the economy tanked again?
Yup. They cut spending and raised taxes to balance the budget, and the Fed required banks to increase reserves, i.e. monetary tightening.
 

Truthmatters

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Im glad to see those who are right leaning admitting the history
 

Quantum Windbag

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From the 1960s through his death in 2006, the dominant intellectual figure in Republican economic policy was University of Chicago economist Milton Friedman. He thought that the gold standard was nuts and that the Fed’s greatest failure was that it didn’t provide enough money to the economy during the Great Depression. While we don’t know what Friedman would be saying today, there is reason to believe that his views would be the opposite of Paul, Perry and many other Republicans.

We know this because Friedman commented often on Japan’s stagnation in the 1990s, that was very similar to the U.S. situation now. In a December 17, 1997, article in the Wall Street Journal, he gave this prescription for Japan’s problem:
“The surest road to a healthy economic recovery is to increase the rate of monetary growth, to shift from tight money to easier money…. Defenders of the Bank of Japan will say, ‘How? The Bank has already cut its discount rate to 0.5 percent. What more can it do to increase the quantity of money?’ The answer is straightforward: The Bank of Japan can buy government bonds on the open market, paying for them with either currency or deposits at the Bank of Japan, what economists call high-powered money.”​
With the Federal Reserve’s discount rate at zero, monetary conditions in the U.S. are parallel to those in Japan. Unfortunately, the low level of interest rates has blinded many economists to the necessity of further Fed action. As Friedman explained in his article, it is “misleading” to judge monetary policy by interest rates. “Low interest rates are generally a sign that money has been tight…high interest rates, that money has been easy,” he wrote.

I believe that if Friedman were still alive, he would be among the sharpest critics of Republicans’ attacks on the Fed. Perhaps his great stature would have been enough to keep them from going off in the wrong direction.
Fed Bashers: Take A Lesson from Milton Friedman
And Keynes opposed the way Obama is trying to fix the economy.

When we start actually following the advice of the great economists we can start actually debating which one was right. Until then, all I have to say is what we are doing is not working.
 

Quantum Windbag

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If the Republicans win everything in 2012 - and I think they will - we could have a repeat of 1937.

We might have a repeat even if they don't.
You are not making any sense. I know you think the Republicans have everything wrong, but I do not see another Hindenburg disaster on the horizon.

:eusa_whistle:

In order for there to be a repeat of 1937 there would have to be a repeat of the conditions that existed before 1937. There is currently no massive public works project that took unemployment from 25% down to 14%. Besides, Obama is already doing the same thing Roosevelt did to combat that recession, he is blaming everything on the big corporations who refuse to spend money.
 

Truthmatters

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Austerity will not work.

that is what the republicans are running on
 
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And Keynes opposed the way Obama is trying to fix the economy.

When we start actually following the advice of the great economists we can start actually debating which one was right. Until then, all I have to say is what we are doing is not working.
Keynes would absolutely have supported the spending in the stimulus bill (though maybe he would have opposed the onerous process to disburse funds).
 

expat_panama

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Austerity will not work. that is what the republicans are running on

OK, now that you've defended us from the ferocious straw man we can get back to policy. .

Toro's right with Fed Bashers: Take A Lesson from Milton Friedman, but that's with the fed's monetary policy and it can only go so far. What we need now is fiscal policy in the form of tax cuts like we had in '61, '83, and '03.
 

Truthmatters

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what is it that every R candidate is pushing to fix the economy?
 

CrusaderFrank

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If the Republicans win everything in 2012 - and I think they will - we could have a repeat of 1937.

We might have a repeat even if they don't.
Was "1937" a typo?
^^^^^^^^^^^
Hence why we are probably going to do so...
Odd that you didn't type "1920-21" the last time real small government Republicans ran thing but chose instead the year the second most Liberal Congress ever was inaugurated.
 

Quantum Windbag

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And Keynes opposed the way Obama is trying to fix the economy.

When we start actually following the advice of the great economists we can start actually debating which one was right. Until then, all I have to say is what we are doing is not working.
Keynes would absolutely have supported the spending in the stimulus bill (though maybe he would have opposed the onerous process to disburse funds).
Keynes said that spending to get out of a recessions should be targeted, immediate, and temporary. Can you point to the portions of the stimulus that meet those qualifications?
 

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