Milton Friedman on Money, banking, and the gold standard
The swap agreements serve no useful function and Congress should terminate the Fed’s authority to enter into them. Their only role is to enable the U.S. Government to “intervene” in order to affect exchange rates. We and the world would be better off if exchange rates were determined in a free market. And whatever other countries do, the U.S., as the source of the key international money, has no business engaging in currency manipulation to affect exchange rates.
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. The swap agreements are the Federal Reserve’s arrangements with other central banks to lend each other their currencies on demand, which the column has just described.
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Milton Friedman, “Speculation and Speculation” (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, 1973), Congressional Record, February 7, 1978, pp. 2590 to 2591. https://miltonfriedman.org/quotes/swap-agreements-no-useful-function-free-market-exchange-rates-1973
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He also said
During the recent international monetary crisis, governments in all lands blamed currency speculators for their troubles. At the same time, the governments themselves engaged in currency speculation—though of course they called it by a different and more dignified name. They engaged in “intervention.”
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.
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 private speculation that the governments deplored was socially useful and had desirable effects. The official speculation in which the governments engaged was socially harmful and had undesirable effects.
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.
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 big difference between government coercion and private markets is that government can use coercion to make an exchange in which A benefits and B loses. But in the market, if A and B come to a voluntary agreement, it's because both of them are better off.
Context. Asked why he could see the black market as a positive thing, in a PBS interview for the series Commanding Heights. He goes on to say that breaking the law counts against it.
Commanding Heights: Milton Friedman interviewInterview, 2000, PBS, “The Economic Logic Behind Black Markets,” interview conducted October 1, 2000Checked against the sourceRead the transcript
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