Debate on Milton Friedman’s cure for inflation “Friedman Friday”

If you would like to see the first three episodes on inflation in Milton Friedman’s film series “Free to Choose” then go to a previous post I did.

Ep. 9 – How to Cure Inflation [4/7]. Milton Friedman’s Free to Choose (1980)

Uploaded by on Jun 16, 2010

While many people have a fairly good grasp of what inflation is, few really understand its fundamental cause. There are many popular scapegoats: labor unions, big business, spendthrift consumers, greed, and international forces. Dr. Friedman explains that the actual cause is a government that has exclusive control of the money supply.

Friedman says that the solution to inflation is well known among those who have the power to stop it: simply slow down the rate at which new money is printed. But government is one of the primary beneficiaries of inflation. By inflating the currency, tax revenues rise as families are pushed into higher income tax brackets. Thus, inflation transfers wealth and resources from the private to the public sector. In short, inflation is attractive to government because it is a way of increasing taxes without having to pass new legislation to raise tax rates. Inflation is in fact taxation without representation.

Wage and price controls are not the cure for inflation because they treat only the symptom (rising prices) and not the disease (monetary expansion). History records that such controls do not work; instead, they have perverse effects on both prices and economic growth and undermine the fundamental productivity of the economy. There is only one cure for inflation: slow the printing presses. But the cure produces the painful side effects of a temporary increase in unemployment and reduced economic growth. It takes considerable political courage to undergo the cure.

Friedman cites the example of Japan, which successfully underwent the cure in the mid-seventies but took five years to squeeze inflation out of the system. Inflation is a social disease that has the potential for destroying a free society if it is unchecked. Prolonged inflation undermines belief in the basic equity of the free market system because it tends to destroy the link between effort and reward. And it tears the social fabric because it divides society into winners and losers and sets group against group.

Below are some other posts I did about Milton Friedman’s ideas:

Who was Milton Friedman and what did he say about Social Security Reform? (Part 1)

Balanced Budget Amendment the answer? Boozman says yes, Pryor no, Part 22(Milton Friedman tells us how to stay free Part 1))

Why do people move to other states to avoid Arkansas’ high state income tax? (If you love Milton Friedman then you will love this post)

Pat Lynch: We need to bring tax rates back up for Rich (Real Cause of Deficit Pt 10)(If you love Milton Friedman then you will love this post)

Gene Lyons: Tax Cuts always reduce tax revenues (Part 2)

Balanced Budget Amendment the answer? Boozman says yes, Pryor no (Part 19, Milton Friedman’s view is yes)(Royal Wedding Part 19)

Gene Lyons: Tax Cuts always reduce tax revenues (Part 1)(The Conspirator Part 23)

John Fund’s talk in Little Rock 4-27-11(Part 2):Arkansas is a right to work state and gets new businesses because of it, Obama does not get that, but Milton Friedman does!!!(Royal Wedding Part 18)

Balanced Budget Amendment the answer? Boozman says yes, Pryor no (Part 12, Milton Friedman’s view is yes)(The Conspirator Part 15)

Creation of wealth in this country based on “self interest or greed” helps ordinary folks too..

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