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Milton Friedman - Wikiquote
Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output. ... A steady rate of monetary growth at a moderate level can provide a framework under which a country can have little inflation and much growth. It will not produce perfect stability; it will not produce heaven on earth; but it can make an important contribution to a stable economic society.
  • The Counter-Revolution in Monetary Theory (1970)

Always is a very strong claim, it just needs one example to be proven false. Now, as you know the inflation of Sweden and Switzerland during world war two was a bit of rollercoster:

I haven't been able to find Switzerland's amount of money these years, but I did find
 a long term graph for Sweden (M3 in percentage of GDP). So according to the theory we are expecting a big increase in 1939.

No big uptick in 1939 as far as I can see. No uptick at all until the end of the war (when inflation is down)

Myth busted.

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by A swedish kind of death on Wed Jan 15th, 2014 at 03:02:56 AM EST
A steady rate of monetary growth at a moderate level can provide a framework under which a country can have little inflation and much growth. It will not produce perfect stability; it will not produce heaven on earth; but it can make an important contribution to a stable economic society.
Interesting: nominal GDP targeting and inflation as a financial stabilizer, all coming from Friedman...

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 15th, 2014 at 04:03:32 AM EST
[ Parent ]
As always, Friedman != Lucas/Prescott.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Thu Jan 23rd, 2014 at 03:18:14 PM EST
[ Parent ]
It is one thing to assert axioms such as 'parallel lines never meet', an assertion for which there was no obvious falsification for over 2,000 years, as did Euclid. It is quite another to assert "Inflation is always and everywhere a monetary phenomenon" as did Freedman - an assertion for which it is not even that difficult to falsify. I would argue that Freedman was making a normative assertion - 'this is what we should accept as the basis for our understanding', though without labeling it as such. With that statement, amplified by friendly media and bespoke think tank output, Freedman effectively Mesmerized the Anglo economics and political sphere. But in both professions what practitioners saw on the bob that was swinging back and forth before their eyes was a dollar sign representing the security of their income and their continued enjoyment of the grace of the wealthy and powerful. Science-schmience! This is real money here!  

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Jan 15th, 2014 at 10:58:04 AM EST
[ Parent ]
It is one thing to assert axioms such as 'parallel lines never meet', an assertion for which there was no obvious falsification for over 2,000 years, as did Euclid.
That's not even an axiom, it is a definition. There are no parallel lines on a sphere. The axiom of parallels is something entirely else:

  • There is at most one line that can be drawn parallel to another given one through an external point. (Playfair's axiom)
  • The sum of the angles in every triangle is 180° (triangle postulate).
  • There exists a triangle whose angles add up to 180°.
  • The sum of the angles is the same for every triangle.
  • There exists a pair of similar, but not congruent, triangles.
  • Every triangle can be circumscribed.
  • If three angles of a quadrilateral are right angles, then the fourth angle is also a right angle.
  • There exists a quadrilateral in which all angles are right angles.
  • There exists a pair of straight lines that are at constant distance from each other.
  • Two lines that are parallel to the same line are also parallel to each other.
  • In a right-angled triangle, the square of the hypotenuse equals the sum of the squares of the other two sides (Pythagoras' Theorem).
  • There is no upper limit to the area of a triangle. (Wallis axiom)
  • The summit angles of the Saccheri quadrilateral are 90°.
  • If a line intersects one of two parallel lines, both of which are coplanar with the original line, then it also intersects the other. (Proclus' axiom)


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 15th, 2014 at 11:05:46 AM EST
[ Parent ]
Perhaps falsification was not the proper choice of words.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Jan 16th, 2014 at 12:56:57 AM EST
[ Parent ]
Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.

The Emergency Economic Stabilization Act of 2008:

... analysis by Bloomberg found the Federal Reserve had, by March 2009, committed $7.77 trillion to rescuing the financial system, more than half the value of everything produced in the U.S. that year

So, where's the inflation?

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Wed Jan 15th, 2014 at 12:42:18 PM EST
[ Parent ]
Lending government money to rich people is growth, because only rich people create growth.

Lending government money to poor people is inflationary, because only poor people create inflation.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Jan 15th, 2014 at 01:30:05 PM EST
[ Parent ]
If you're an Austrian you can always get around not seeing price inflation:

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jan 16th, 2014 at 08:46:45 AM EST
[ Parent ]
Isn't expansion of the money supply supposed to trigger declining value of the monetary unit, or is the market catatonic?
by afew (afew(a in a circle)eurotrib_dot_com) on Thu Jan 16th, 2014 at 08:58:17 AM EST
[ Parent ]
I suppose the market has been drugged out of its senses by easy money.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jan 16th, 2014 at 09:42:32 AM EST
[ Parent ]
Mr. Market is undergoing treatment for Anti-social Personality Disorder.  Aripiprazole has been prescribed and the doctors are confident he will be able to be released to a half-way house in the near future.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Fri Jan 17th, 2014 at 12:24:59 PM EST
[ Parent ]
What an idiot.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Tue Jan 21st, 2014 at 12:25:12 PM EST
[ Parent ]
Sure, but it must be nice to be able to change the meaning of words to suit your statements. You can make any testable prediction, provided you use other words than in your previous testable predictions, and you will always be proven right!

It makes science somewhat easier to practice, doesn't it?

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Tue Jan 21st, 2014 at 12:50:42 PM EST
[ Parent ]
Right.  "Your definitions don't agree with me, so I'll make up new ones, because fuck reality."

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Tue Jan 21st, 2014 at 08:03:17 PM EST
[ Parent ]
They're like Humpty Dumpty: Words mean what they say they mean.  I saw that in my macro class 35 years ago.
by rifek on Thu Jan 30th, 2014 at 12:19:10 PM EST
[ Parent ]
Since my study in geology, practically any use 'always' in connotation to whatever claim make my eyes roll.

Though the word still ranks behind the wanton bandying of 'unprecedented' and the no. 1 personal irritant: (biggest/smallest) 'ever'. That one is even worse than the improper usage of Holland...

by Bjinse on Thu Jan 16th, 2014 at 06:51:03 AM EST
[ Parent ]
That one is the worst ever?
by afew (afew(a in a circle)eurotrib_dot_com) on Thu Jan 16th, 2014 at 07:47:49 AM EST
[ Parent ]
Friedman was more full of BS than the Chicago stockyards ever were.
by rifek on Fri Jan 17th, 2014 at 01:23:21 AM EST
[ Parent ]
I'm assuming that's Swedish M3 data.  Don't know what M3 represents at the Bank of Sweden, but if it's the same as the American version, it's not a useful indicator on growth and inflation.  M2 is the better one.  M3 seems to exist primarily to fuel ShadowStats subscriptions.

(Note:  Doesn't mean M2 causes either.)

Inflation is, of course, not always and everywhere a monetary phenomenon.  In fact, the bad (non-hyperinflationary) bouts of it almost always seem to me to be about supply shocks.  Once the resource shock eases, inflation eases.

To be fair, Friedman acknowledged that monetarism didn't pan out.

The real problem is that the rise of Friedman resulted in fraudulent discrediting of Keynes, a quiet Friedman exit, and the real counter-revolution -- the New Classicals, led by Lucas and Prescott.  Their credibility rested in part on (thanks to Friedman's notoriety) originating at Chicago.

While the field has obviously had its share of assholes throughout history (eg, Samuelson), the New Classicals were the Gingrich Republicans of economics.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Thu Jan 23rd, 2014 at 08:06:12 PM EST
[ Parent ]
Drew J Jones:
I'm assuming that's Swedish M3 data.

Yes.

Drew J Jones:

Don't know what M3 represents at the Bank of Sweden, but if it's the same as the American version

Have to admit I choose the graph because it was there, but upon checking, no, apparently not.

Penningmängd 1871-2006 | Sveriges Riksbank

M3. Omfattar M0, inlåning i banker och bankcertifikat.

M0 is coins and bills held outside banks (including private bank bills until 1903). M3 is M0 plus deposits plus bankcertifikat. Bankcertifikat are as far as I can tell bank issued bonds with a fixed interest and a maturity of not more then one year. From wikipedia I can't see a direct US equivalent.

No argument on the substance of your comment. Guess I got triggered by the 'always'.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Fri Jan 24th, 2014 at 07:06:04 AM EST
[ Parent ]

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