Milton Friedman on Spending other people's money
The cumulated exchange losses of the central banks of Britain, Germany and Japan over this period have never, so far as I know, been totaled, but there is little doubt that they are a multiple of U.S. losses. And is that surprising? What else would you expect from gambling with other people’s money?
Context. From a 1978 column written after the Federal Reserve and the Treasury announced in early January 1978 that they would intervene in the foreign-exchange markets to support the falling dollar. “This period” is 1971 to 1977, for which the column has just tabulated the Federal Reserve’s own losses on currency intervention.
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Cite this passage
Milton Friedman, “Back to the Gaming Table” (A column of early 1978, reprinted in the Congressional Record, Senate, February 7, 1978, p. 2590, introduced by Senator William Proxmire among “articles by Professors Friedman, Okun, and Schmidt” under the heading “Letting the Dollar Float”. The reprint names no publication and gives no issue date; the column refers to writing “in this space” in 1973, which marks it as one of his regular columns, 1978), Congressional Record, February 7, 1978, p. 2590. https://miltonfriedman.org/quotes/gambling-with-other-peoples-money-central-bank-losses-1978
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He also said
Private speculators are far from omniscient. This time, they happened to be right and so made handsome profits. Next time, they may be wrong and suffer grievous losses. But in either case, they speculate at their own risk with their own money. Official speculators, too, are far from omniscient. This time, they were wrong; next time, they may be right. But there is an important reason why they are more likely to be wrong than right. They speculate not with their own money but with the taxpayers’ money. As a result, there is little pressure on them to control their natural impulse to resist change.
Context. From an April 1973 column written after the international monetary crisis of early 1973, in which the dollar was devalued on February 12, 1973 and the major currencies soon moved to floating exchange rates. “This time” is that early-1973 crisis.
Speculation and SpeculationColumn, 1973, A column of April 23, 1973, reprinted in the Congressional Record, Senate, February 7, 1978, p. 2590, introduced by Senator William Proxmire among “articles by Professors Friedman, Okun, and Schmidt” under the heading “Letting the Dollar Float” (pp. 2590 to 2591). The reprint names no publication and gives no date; the date is his own, from “Back to the Gaming Table” (1978), which says “I wrote in this space (April 23, 1973)” and quotes this column’s passage on the swap agreements word for word, Congressional Record, February 7, 1978, pp. 2590 to 2591Checked against the sourceRead the originalThe Federal Reserve Board and the Treasury Department recently—though, to their credit, reluctantly—announced that they intend to gamble on a large scale with your money and mine. Of course, that is not how the official announcement phrased it. It spoke of “intervention” to support the dollar and prevent “disorderly” markets. But a spade is a spade even if it is called an unearthing implement. And gambling is gambling even if it is called “intervention.”
Context. From a 1978 column written after the Federal Reserve and the Treasury announced in early January 1978 that they would intervene in the foreign-exchange markets to support the falling dollar.
Back to the Gaming TableColumn, 1978, A column of early 1978, reprinted in the Congressional Record, Senate, February 7, 1978, p. 2590, introduced by Senator William Proxmire among “articles by Professors Friedman, Okun, and Schmidt” under the heading “Letting the Dollar Float”. The reprint names no publication and gives no issue date; the column refers to writing “in this space” in 1973, which marks it as one of his regular columns, Congressional Record, February 7, 1978, p. 2590Checked against the sourceRead the originalThere are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I’m not so careful about the content of the present, but I’m very careful about the cost. Then, I can spend somebody else’s money on myself. … Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government.
Context. From David Asman’s May 15, 2004 interview with him, published by Fox News. Earlier in the conversation he had argued that education and medicine share one problem, third-party payment: someone gets a service from someone else who is paid by a third party; he then blamed that for medicine’s complications.
Interview with David AsmanInterview, 2004, Fox News, May 15, 2004; transcript published by Fox News as “‘Your World’ Interview With Economist Milton Friedman”Checked against the sourceRead the source
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