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Milton Friedman on Monetary policy and the Federal Reserve

Instead of simply requiring the Federal Reserve to report its “projections” or “targets” for monetary growth, let the Congress require the Fed to achieve specified rates of monetary growth (or specified levels of the quantity of money) within specified ranges of tolerance. That would combine responsibility and power. It would also enable the ordinary citizen to know whom to hold accountable for inflation.
Why Inflation Persists
Column, 1977, Newsweek (October 3, 1977); reprinted in full in the Congressional Record, Extensions of Remarks, September 29, 1977, p. 31684, introduced by Representative Parren J. Mitchell of Maryland, who gives it as appearing “in the October 3, 1977, issue of Newsweek”, Congressional Record, September 29, 1977, p. 31684
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  1. Targets should be expressed in terms of dollar levels of monetary aggregates rather than, or in addition to, growth rates. In 1975, Congress required the Fed for the first time to specify targets a year in advance. However, the Fed has evaded the intended discipline by stating targets in terms of growth rates applied to a shifting level of actual monetary totals. This device buried past mistakes and enabled the Fed to start fresh each quarter.
    Improving Monetary Policy
    Column, 1980, Newsweek, July 28, 1980; reprinted in the Congressional Record, Extensions of Remarks, July 28, 1980, p. 20026, introduced by Representative Robert Dornan of California, who gives the column as appearing in the Newsweek issue “dated July 28, 1980”, Congressional Record, July 28, 1980, p. 20026
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  2. The rates of monetary growth specified by chairman Burns are too high. Yet, even so, actual monetary growth has been substantially higher.
    The Inflationary Fed
    Column, 1973, Newsweek, August 27, 1973; reprinted in the Congressional Record, Extensions of Remarks, November 7, 1973, p. 36327, introduced by Representative Robert Huber of Michigan as “Mr. Milton Friedman’s article that appeared in Newsweek of August 27, 1973”, Congressional Record, November 7, 1973, p. 36327
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  3. It matters little whether the Federal Reserve is unable or unwilling to exercise its independence in deeds as well as words. In either case, let us be done with the fiction that “independence” is somehow or other a bastion against inflation. Let us put the responsibility for the rate of monetary growth—and therewith for the subsequent rate of inflation—squarely and openly on the Administration and Congress.
    Why Inflation Persists
    Column, 1977, Newsweek (October 3, 1977); reprinted in full in the Congressional Record, Extensions of Remarks, September 29, 1977, p. 31684, introduced by Representative Parren J. Mitchell of Maryland, who gives it as appearing “in the October 3, 1977, issue of Newsweek”, Congressional Record, September 29, 1977, p. 31684
    Checked against the sourceRead the original

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