Milton Friedman Would Have Hated Ben Bernanke!
- Posted by TheArmoTrader
- on July 31st, 2012
Today would have been Milton Friedman’s 100th birthday. If you follow the econ-blogosphere, everybody has something to say about him today. A lot of talk about Friedman is centered around his free-market, anti-government ideals and principles.
However, what is not being said is how much he loved central bank intervention! If you take a look at Friedman’s “Reviving Japan” paper, you’d see that he was a big advocate of Large Scale Asset Purchases (LSAP) via Quantitative Easing (QE). He not only advocated for QE, but advocated for unlimited (no announced size) QE until the central bank nominal level target was met.
This is why Friedman would have hated current Federal Reserve Chairman Ben Bernanke –because he was failing to do his job properly! Bernanke has gone through 2 rounds of pure QE (Twist doesnt count because it does not alter the money supply) but has failed to get the economy going. Friedman would have pushed for nominal level targeting and would have met that goal by pushing for LSAPs. Of course Friedman misunderstood how QE worked, as LSAPs really can’t get a demand-depleted economy going (See my post on this topic), but that’s not the issue on hand here.
Given that the mainstream view of central bank’s is that their actions are ‘central planning’ or ‘government intervention’, does this make Milton Friedman, the greatest free-market thinker of all-time, a big government guy?
Oh ya, don’t forget, he also preferred printing money over borrowing it to finance government operations.
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Jerry Khachoyan is currently an undergraduate student at UCLA pursuing a degree in Political Science. He started trading in September of 2008. He concentrates on using technical analysis and reading the tape to enter the best risk/reward trades. The stock market to him is one of the greatest inventions by man.
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