Skip to content

Milton Friedman on Monetary policy and the Federal Reserve

Analysis of the supply of money, and in particular of changes in the supply of money, is simple in principle but extremely complex in practice, both in our hypothetical world and in the current real world. Simple in principle, because the supply of money is whatever the monetary authorities make if, complex in practice, because the decisions of the monetary authorities depend on numerous factors.
Money Mischief
Book, 1992, Ch. 2 The Mystery of Money
Not yet checkedCite this passage

Where this comes from

Not yet checkedThe wording comes from a secondary compilation and has not yet been checked against the work itself.

Topics

He also said

  1. Over short periods, the relation between growth in money and growth in nominal income is often hard to see, partly because the relation is less close for short than for long periods, but mostly because it takes time for changes in monetary growth to affect income. And how long a time is itself variable. Today's income growth is not closely related to today's monetary growth; it depends on what has been happening to money in the past. What happens to money today affects what is going to happen to income in the future
    Money Mischief
    Book, 1992, Ch. 2 The Mystery of Money
    Not yet checked
  2. More frequently, they have moved in the right direction, albeit often too late, but have erred by moving too far. Too late and too much has been the general practice.
    The Role of Monetary Policy
    Journal article, 1968, American Economic Review 58, no. 1 (March 1968), pp. 1–17; reprinted in the House Banking and Currency Committee’s 1968 Compendium on Monetary Policy Guidelines and Federal Reserve Structure, pp. 214–224, p. 223 of the 1968 House reprint
    Checked against the sourceRead the original
  3. It is immediately clear that if we were to take up each case separately, a majority would almost surely vote to deny free speech in most cases and perhaps even in every case. ( … ) Exactly the same considerations apply in the monetary area. If each case is considered on its merits, the wrong decision is likely to be made in a large fraction of cases because the decisionmakers are examining only a limited area and are not taking into account the cumulative consequences of the policy as a whole.
    Should There Be an Independent Monetary Authority?
    Journal article, 1962, In Search of a Monetary Constitution, ed. Leland B. Yeager (Harvard University Press, 1962), pp. 219–243; reprinted in the House Banking and Currency Committee’s 1968 Compendium on Monetary Policy Guidelines and Federal Reserve Structure, pp. 205–214, p. 213 of the 1968 House reprint
    Checked against the sourceRead the original

Think this quote is wrong, misattributed, or missing context?Report it and it gets fixed, not argued with.