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Milton Friedman on Monetary policy and the Federal Reserve

For many years, your government has been trying to fine-tune monetary and fiscal policy in order to avoid both unemployment and inflation. A growing number of people—inside government and outside—have concluded that such fine-tuning has not worked. It has not prevented repeated recessions. It has not prevented worse and worse inflation.

Context. From a 1979 Newsweek column. The column is framed as a daydream: he imagines President Carter giving a televised talk, and everything inside the talk is his own recommendation voiced through that imagined Carter, not anything Carter said. The opening of the imagined talk: the failure of fine-tuning, which his imagined President says raises questions about everything else government does.

What Carter Should Do
Column, 1979, Newsweek, June 18, 1979; reprinted in the Congressional Record, Extensions of Remarks, June 13, 1979, p. 14740, introduced by Representative G. William Whitehurst of Virginia, who cites “the June 18, 1979, issue of Newsweek”, Congressional Record, June 13, 1979, p. 14740
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Milton Friedman, “What Carter Should Do” (Newsweek, June 18, 1979; reprinted in the Congressional Record, Extensions of Remarks, June 13, 1979, p. 14740, introduced by Representative G. William Whitehurst of Virginia, who cites “the June 18, 1979, issue of Newsweek”, 1979), Congressional Record, June 13, 1979, p. 14740. https://miltonfriedman.org/quotes/fine-tuning-has-not-worked-what-carter-should-do-1979

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He also said

  1. The only way you could get the inflation down was by having monetary contraction. There was no way you could do that without having a temporary recession. The great error in the earlier period had been that whenever there was a little contraction there was a tendency to expand the money supply rapidly in order to avoid unemployment. That stop-and-go policy was really what bedeviled the Fed during the '60s and '70s.

    Context. On why Reagan's support for Paul Volcker's tight money mattered.

    Commanding Heights: Milton Friedman interview
    Interview, 2000, PBS, “On Ronald Reagan,” interview conducted October 1, 2000
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  2. There is one and only one basic cure for inflation: slowing monetary growth. But that cure is easier to state than to put into effect: witness our repeated abandonment of the cure.

    Context. From a Newsweek column of October 1977, when inflation, having fallen below 5 percent in 1976, was rising again and money growth had returned to its 1972 pace.

    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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  3. If the relation that has prevailed between money and prices for the past dozen years continues, and if the Federal Reserve continues to permit the quantity of money to grow by 10 per cent a year, inflation will proceed at a rate of about 6 per cent. Judged not by pronouncements, not by intentions, but by performance, that is the rate that monetary policy for the past four years has been directed at producing.

    Context. From a June 1974 Newsweek column, written as computed price indexes showed double-digit inflation, arguing that the jump largely reflected price increases suppressed by the 1971 to 1973 controls, and that the underlying cause was money growing faster than output. A footnote to the first clause says the relation has “prevailed for as far back as the data go”, but that in the United States over the past dozen years it is “closer than the average relation.”

    Perspective on Inflation
    Column, 1974, Newsweek (June 1974); reprinted in the Congressional Record, Extensions of Remarks, June 18, 1974, pp. 19786 to 19787, introduced by Representative Jack Kemp of New York, who calls it “his column this week in Newsweek.” The reprint gives no issue date, and the chart that ran with the column is not reproduced, Congressional Record, June 18, 1974, pp. 19786 to 19787
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