Friedman’s steady growth in the monetary supply was later refined in the Taylor Rule. Both Friedman and Taylor attempt to fix our broken central banking and fiat currency system. What they fail to take into account is that there has never been a long term fiat currency success in the history of the world. Confidence that our politicians and Federal Reserve board can get it right, when no one has ever done so before is foolish.

One of the Federal Reserves stated goals is to control inflation. How stupid do they think we are? The only goal of the Federal Reserve is to inflate our money. That’s what they do. They coordinate inflation among all the banks. They is their only job.

In a gold standard the value of our money increases by the increase in the rate of productivity, around 3% a year. You could take your gold dollars and hide them in a shoe box and in 23 years they will have twice the purchasing power. If savers received a modest 4% return on their conservative savings, their purchasing power would double in ten years. Try that with Federal Reserve notes.

The inflation resulting from central banking and fiat currency requires wild speculation in order to keep pace with inflation. Your grandmother should not have to put all her money on black or red in order not to see her life long savings stolen by inflation.

As to Milton Friedman, I was in Washington, D.C. in the 1980s and there was pretty strong friction between the Friedmanites and the supply-siders (and Austrians). For example, the 1982 Gold Commission that Reagan created was dominated by Friedmanites and conservative Keynesians. But Lewis Lehrman, a supply-sider, and Ron Paul, an Austrian, issued a Minority Report, which is free here:
http://mises.org/books/caseforgold.pdf

And here’s a 2000 “Memo on the Margin” to Larry Lindsey by Jude Wanniski, who helped craft Reagan’s supply-side tax cuts, attacking Friedman:

“In your Wall Street Journal op-ed of Jan. 27, remarking on ‘The 17-Year Boom,’ you opened by saying Bill Clinton would probably take credit for the booming economy when he delivered his State of the Union speech that night. He did. But as I read on, looking for your take on who should get credit, I never found the names of any of the original supply-siders or of Ronald Reagan. Instead, I find this outrageous statement: ‘Economists came to see “supply side” management of both inflation expectations and the supply of labor and capital as at least as important as ‘demand side’ management of spending power. Milton Friedman’s lonely voice gave way to a chorus, and the Reagan administration translated it into policy.’

“Larry, this 17-year economic expansion had absolutely nothing to do with the lonely voice of Milton Friedman. It was, in fact, Friedman and his dopey monetarist idea that you could manage the national economy to perfection by increasing the money supply by 3 percent a year that caused the worst inflation in world history! When he persuaded Richard Nixon in 1973 to formally break the dollar’s link to gold, the world economy went into a tailspin, from which it has not yet completely recovered. Witness the poverty of five-sixths of the world’s population. It was not until Ronald Reagan abandoned Friedman’s experiment in 1983 — when to continue it would have meant the collapse of all our money-center banks — that the 17-year expansion began. The Fed then was allowed to provide the liquidity being demanded by the market in order to capitalize on the lower Reagan tax rates. That’s what was going on.”

Here’s the link, with the full Memo: http://www.wnd.com/index.php?pageId=2914

If Lindsey had listened to Wanniski in 2000, perhaps he would have performed better in 2001-02 when he was director of Bush’s National Economic Council.

As I have already posted elsewhere in cutting the piece by 40% I agreed to too tight of a lede that conflated a much more complex. Friedman was not a supply-sider.

But his ideas have been joined with those of the supply-siders into a policy amalgam. One need need adopt every scripture to embrace a canon.

My full article ran in 40 alternative weeklies, with most of my charts included at
http://www.wweek.com/portland/article-17350-9_things_the_rich_dont_want_you_to_know_about_taxes.html

I appreciate your thoughtful critique of my piece and you make some excellent points, especially on the hundreds of annual changes in tax law, which I have written elsewhere are driven by politicians as the easiest way to rile up voters, dole out favors and raise contributions, as documented in my award-winning bestseller Perfectly Legal.

Also, you misspelled my name.

Allbests

To maintain their corrupt power the Demos & Republicans joined together and put Prop 14 on the ballot last year that in effect bans all independent candidates and all opposition parties from all future general election ballots.

We live in a one-party Socialist Dictatorship.