

What would Milton Friedman do now? - jedwhite
http://online.wsj.com/article/SB10001424052702303443904575578202202857136.html

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joelmichael
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...](http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/default.htm)

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/2002/200211...](http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021108/default.htm)

Friedman explains this himself in the following clip from his television
series: <http://www.youtube.com/watch?v=9V5OP-VmXgE>

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fexl
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!

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joelmichael
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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bjnortier_hn
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 BOJ in the article that he would support
buying government bonds only as a way to provide liquidity to banks. In the
current US scenario, the banks and corporations have enough capital, so I
cannot see that Friedman would support QE2.

P.S. "Friedman believed in the power of money". Nonsense. He believed in the
power of individual freedom.

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CWuestefeld
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?

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bjnortier_hn
Downvoting it without posing a counter-argument doesn't help me in examining
my own subjective beliefs. If I'm wrong, I want to know why.

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pierrefar
_"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.

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

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_stephan
Short reply by Krugman: [http://krugman.blogs.nytimes.com/2010/10/28/friedman-
on-japa...](http://krugman.blogs.nytimes.com/2010/10/28/friedman-on-japan/)

~~~
Isamu
I found this helpful, as I am not familiar with the term:
<http://en.wikipedia.org/wiki/Liquidity_trap>

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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.

