~BW Uzelman
Milton Friedman was a prolific writer and a widely respected economic theorist in the second half of the twentieth century. His witty and sharp expression of ideas was unequalled by that of his colleagues. Friedman害羞草研究所檚 message was understandable and compelling to a considerable segment of the public of the United States 害羞草研究所� he was an American 害羞草研究所� and Canada and other nations, too. He had a public following.
Friedman was a proponent of free enterprise and minimal government activity. He quipped, 害羞草研究所淚f you put the federal government in charge of the Sahara Desert, in five years there害羞草研究所檇 be a shortage of sand.害羞草研究所� Similarly, he contended, 害羞草研究所淗igher taxes never reduce the deficit. Governments spend whatever they take in and then whatever they can get away with.害羞草研究所� That害羞草研究所檚 perhaps a little cynical, but it resonated with people then and resonates still.
Friedman害羞草研究所檚 theories became the foundation for the monetarist school of economic thought; he in turn became its leading advocate. Keynesian economists supported fiscal policy 害羞草研究所� the management of government spending levels 害羞草研究所� as the most important tool to stimulate or to slow the economy. The monetarists, in contrast, argued that monetary policy 害羞草研究所� the manipulation of the money supply 害羞草研究所� should be the primary tool to control economic variables. Freidman is credited with establishing the great influence enjoyed by the monetarists, beginning in the 1950害羞草研究所檚 and enduring for decades.
One of Friedman害羞草研究所檚 most famous quotes centered on inflation and money supply. 害羞草研究所淚nflation is always and everywhere a monetary phenomenon,害羞草研究所� he declared, 害羞草研究所渋n the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.害羞草研究所� He encouraged a gradual increase in the money supply to allow for the growth of the economy, but warned a rapid increase promotes inflation.
Inflation plagued western economies from the 1960s to the early 1980s. This resulted in the influence of the monetarists waning in the 1980s and subsequent decades. But the leading monetarist remained defiant. The Federal Reserve害羞草研究所檚 failure to control inflation, Friedman said, was due to their emphasis on interest rates rather than the money supply.
All of this is pertinent to prevailing events. Economists are beginning to refocus on the money supply. Terance Corcoran writes in the Financial Post, 害羞草研究所渁 new modern monetary policy is taking shape across the world.害羞草研究所� The policy, he says, relies on older theories that had been discounted until recently. Corcoran is referring to the work of Friedman and the monetarists. He calls the new movement 害羞草研究所渘eo-Friedmanism害羞草研究所�, and credits its rise to the reemergence of international inflation. Corcoran points to two new reports, one by TD Economics and one by the International Monetary Fund.
James Marple, senior economist at TD Economics, argues, 害羞草研究所淗istory has shown that sustained high rates of inflation cannot occur without excessive money growth.害羞草研究所� This statement echoes Friedman害羞草研究所檚 decades earlier. Marple produces a graph showing the sharp uptick in (M1) money supply during the pandemic followed by an abrupt deceleration in money growth in early 2021. This pattern is reflected, after a lag of several months, by a near identical sharp increase of the inflation rate followed by a sudden fall. As Friedman had asserted, 害羞草研究所淚nflation is always and everywhere a monetary phenomenon.害羞草研究所�
The IMF paper looks at 100 inflation shocks in 56 countries since the 1970s. The paper found that, 害羞草研究所淔irst, [based on history] today害羞草研究所檚 economies may be in for a long inflation-fighting period.害羞草研究所� 害羞草研究所淪econd, policy consistency is key.害羞草研究所� It is crucial, the IMF notes, to exercise both tight monetary and fiscal policies for an extended period of time. The key finding, reads the paper, is that the successful resolutions of inflation were, 害羞草研究所渁ssociated with more substantial monetary policy tightening.害羞草研究所� That, for the IMF, includes both raising interest rates and cutting the growth of the money supply.
The IMF report, at least in part, echoes Friedman. He supported cutting government largesse and containing the growth of the money supply. He stated, 害羞草研究所淭here is only one real cure for inflation. 害羞草研究所� The government must reduce spending and print less money. The alternatives are both recession and double-digit inflation.害羞草研究所� Friedman doesn害羞草研究所檛 offer answers to all economic problems, but has made and will continue to make a vital contribution to contemporary economic thinking. While not all economists accept monetarism, its influence is reemerging.
Friedman害羞草研究所檚 colourful commentary on government enhanced public awareness and certainly provided for popular amusement. 害羞草研究所淣othing is so permanent as a temporary government program,害羞草研究所� he once remarked. And, in a more serious moment, he alleged, 害羞草研究所淚nflation is taxation without representation.害羞草研究所�
bruce
Bruce W Uzelman
I attended the University of Saskatchewan in Saskatoon.I obtained a Bachelor of Arts, Advanced with majors in Economics and Political Science in 1982.
I have maintained a healthy interest in politics throughout my adult years, and wish to put that and my research skills to work as a political columnist.
Contact: urbangeneral@shaw.ca
