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Milton Friedman on Money, banking, and the gold standard

The term money has two very different meanings in popular discourse. We often speak of someone “making money,” when we really mean that he or she is receiving an income. We do not mean that he or she has a printing press in the basement churning out greenbacked pieces of paper. In this use, money is a synonym for income or receipts; it refers to a flow, to income or receipts per week or per year. We also speak of someone’s having money in his or her pocket or in a safe-deposit box or on deposit at a bank. In that use, money refers to an asset, a component of one’s total wealth.
Money Mischief
Book, 1992, Ch. 2 The Mystery of Money
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Milton Friedman, “Money Mischief” (1992), Ch. 2 The Mystery of Money. https://miltonfriedman.org/quotes/term-money-two-very-different-meanings-popular-1992

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  1. Why should they also be accepted by private persons in private transactions in exchange for goods and services? The short answer—and the right answer—is that private persons accept these pieces of paper because they are confident that others will. The pieces of green paper have value because everybody thinks they have value. Everybody thinks they have value because in everybody’s experience they have had value …

    Context. “They” are the dollar’s pieces of green paper. Just before, he notes that the courts will regard them as discharging any debts stated in dollars.

    Money Mischief
    Book, 1992, Ch. 2 The Mystery of Money
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  2. That is a widespread myth, that it is possible to spend money with nobody paying for it. You have everybody screaming that we ought to have new, bigger, more generous government programs. Where are we going to raise the money? Tax business. But business corporations can’t pay any taxes. A corporate executive may sign the check, but where does he get the money? From his stockholders or from his customers or from his employees. Unlike the federal government, he doesn’t have a printing press in his basement. So the only way he can pay money to the government is by imposing a burden on somebody. Government cannot spend money at nobody’s expense …
    Economic Myths and Public Opinion
    Column, 1976, The Alternative: An American Spectator, January 1976; reprinted in Bright Promises, Dismal Performance (Harcourt Brace Jovanovich, 1983), p. 72
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  3. Because if the government spends more or less, somebody else has less or more to spend. There’s an offsetting element unless the government spending is financed by printing money. What really matters is what happens to monetary policy. Monetary policy goes one way and fiscal policy goes the other way. If you look at all such examples, monetary policy has always dominated—not fiscal policy. If you reduce taxes then people have more to spend, but on the other hand, government has less to spend. Why is there any net increase in total spending?

    Context. Asked whether cutting taxes would stimulate a slowing economy, he said it would not, pointing to Japan, which in ten years of rolling recession had had four or five major fiscal stimulus programs, increases in government spending and reductions in taxes, all of them, he said, an utter failure. Asked why, he answered.

    Friedman on the Surplus
    Interview, 2001, Interview by Peter Robinson for Uncommon Knowledge, January 17, 2001; adapted in Hoover Digest 2001 No. 2
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