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Milton Friedman: Please Come Back, All is Forgiven!

Pivotfarm's picture





 

Milton Friedman once said that “if you put the federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand”. I think if he were around still, he would need to revise that. It doesn’t take years to have a shortage of sand and the sand gets blown away pretty quickly. He also went on to say that there was “nothing so permanent as a temporary government program”. It looks like those words hold true today still. The Federal Reserve, once upon a time, had a temporary program in the desert that was going to save us all, kick-start us into the next century because the money that they were temporarily printing would have such a fabulous effect on us that we could only thank them for the oasis that they thought they were building. Now, all we have is  permanent program to build that, as once you start giving a kid milk and keep it on that milk, it’s almost impossible to wean the kid of the stuff, isn’t it?

1990’s                                                                 

We used to like Milton, didn’t we? All of our countries used to! He used to be the man of the moment. The Organisation for Economic Co-Operation and Development (OECD) used to spout on about how we had the guarantee capital against monetary erosion. Paying back our debts was important; reducing taxation was good for the economy. But, that was long ago in a bygone era now of the 1990s. Then the recession reared its ugly head, the Chinese did too. Although there were people predicting the rise of the fire-breathing dragon that would scare us all out of our wits for decades. In the early years of the construction of Europe as a Common Market, there was someone that said, in visionary fashion, words to the effect of “the only thing that will unite Europe is the Chinese”. They were talking about anything else but the fact that the EU would become the EU only when the Chinese forced them to get on with each other.

2000s

We used to like Milton, until he became old-hat. He became just Friedman. It was better (so we thought) to become obsessed with inflation, obsessed with monetary value and exchange rates. We had to cut our exchange rates to look falsely attractive and postpone the onset off the real menace which was the recession in the 2000s. But with it we brought inflationary pressure, rising salaries, rising prices, people who we had to provide for, people we had to print money for just to stay in the game.  When salaries rise, the Federal Reserve keeps an eye on them. Perhaps they are making us think that Friedman is still Milton, the guy we like.

Now

The interest rate of the USA is at 0.25% (May 2013). It averaged out at 6.2% between 1971 and 2013. You don’t need anyone to do the math. Inflation is down, that’s about the only thing he would be happy about, at 1.1% in April 2013. Just two years ago it was at nearly 4%. But, should we be more worried about deflation?

The debt ceiling (now $16.394 trillion) of the US has been raised very year since the crisis slapped them and the rest of us in the faces. You can visualize the debt in one-hundred dollar bills. Roughly 65.8% of US debt is owned by them (financed by the Federal Reserve and Social Security Trust Funds). But, 34.2% is owned by other countries. The UK is just a peanut-size stake-holder with less than 1% today. Japan owns a sizeable chunk at roughly 7% and China has the most with 8.1% (2012). Some say that without quantitative easing, the USA would have been owned by about 41% from overseas governments. The only ones that could have financed that debt would have been the Chinese probably.

Salaries increased on average by 2.1% in the US last year.  They are increasing by 0.3% per quarter roughly this year already again. As for Social Security costs, there won’t be any more money for retirees by 2033 in the USA. It will have dried up; turned to sand. By 2016, there won’t be any more money for those with disabilities.

Conclusion?

Didn’t Milton Friedman espouse programs that made the economic priority the fight against evil inflation and public deficits? Wasn’t the idea to make the state live within its means by making money so very expensive through high interest rates so that the federal government wouldn’t be able to increase those deficits? Wasn’t he the one that believed that unemployment was the result of salaries that were too high, with too many social benefits that would stop unemployed workers from accepting employment at the real cost of their labor?

Haven’t we got ourselves into this mess because we have all tried to pull in different directions? Some of us wanted pay rises (well all of us), some of us wanted to price ourselves out of the labor market, because we wanted  slice of the cream cake and the cherry at the same time. Some of us wanted more benefits. Some of us wanted to be more competitive. Some of us wanted no debt. Something had to give, didn’t it?

Love him or like him, Milton Friedman got it right when he spoke about the temporary programs and the sand in the desert. Bernanke and the Federal Reserve only has to be quoted as saying that perhaps, they have considered the eventuality of the likelihood of possibly cutting the quantitative easing that’s going on. Now, that’s a lot of possibilities and probabilities. But, the kid just starts screaming, because the milk has dried up, the sand has blown away and the kid can’t make his sand castles anymore! Should we be saying Milton Friedman, please come back all is forgiven?

Originally posted Milton Friedman: Please Come Back, All is Forgiven!

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Wed, 06/12/2013 - 13:12 | Link to Comment sgt_doom
sgt_doom's picture

Looney tunes Milty Friedman said many, many weird ass stuff, but my fave was when he said everyone should have at-will employment status, excepting Milton Friedman, of course, who should always enjoy a tenured position.

Yup, espousing the ultimate whacko douchetard, Friedman, is definitely self-incriminating.

What is the name of the stooge who posts here?

Wed, 06/12/2013 - 12:37 | Link to Comment Iwanttoknow
Iwanttoknow's picture

That Friedman who advised nixon to go off gold standard?

Wed, 06/12/2013 - 12:03 | Link to Comment Cow
Cow's picture

Friedman is a hero.  The folks in Chile know it first hand.  They love him.  Turned their country around.

 

Wed, 06/12/2013 - 11:59 | Link to Comment MrBoompi
MrBoompi's picture

Should we be worried about deflation?  Have we ever really had deflation?  How would we know who it would harm and how?  If the prices of food, gasoline, clothing, etc. went down, how would that harm me?  It seems these anti-deflation, pro-inflation policies are designed to help everyone except consumers.  Maybe the Fed, or some other economists could explain the real dangers of deflation to us.

Wed, 06/12/2013 - 12:05 | Link to Comment Conax
Conax's picture

By the late 19th century our manufacturing really took off.  Consumer goods were dropping in price, since the production costs were dropping.  Everyone's lifestyle was improving.  The Fed made sure prices could never go down again.  The banker's lifestyles began to improve...

Bless their skeevy hearts.

Wed, 06/12/2013 - 11:55 | Link to Comment williambanzai7
williambanzai7's picture

Is he hiding in Hong Kong as well?

Wed, 06/12/2013 - 11:43 | Link to Comment NoTTD
NoTTD's picture

Kinky, yes; Milton, no.

Wed, 06/12/2013 - 11:37 | Link to Comment rsnoble
rsnoble's picture

I like Marty Friedman a lot better.

Wed, 06/12/2013 - 11:32 | Link to Comment 123dobryden
123dobryden's picture

i saw him defending liberty in some discussions and he was good, really good, but so is Obama....its deeds that speak for a man, thats why ROTHBARD is the ONE

Wed, 06/12/2013 - 11:15 | Link to Comment the grateful un...
the grateful unemployed's picture

wasn't Friedman behind the overthrow of Allende in Chile?

Wed, 06/12/2013 - 11:05 | Link to Comment Dr. No
Dr. No's picture

He can't be forgiven.  He is the architect behind fedral tax withholding.  yes, later he commented it was a mistake.  However, some mistakes are too grievous to be forgiven.

Wed, 06/12/2013 - 10:50 | Link to Comment smartstrike
smartstrike's picture

Haven’t we got ourselves into this mess because we have all tried to pull in different directions?

 

We're in this mess because we allowed private sector to infest all branches of government including the Supreme Court--Justice Roberts is just another CEO. 

Wed, 06/12/2013 - 11:53 | Link to Comment NotApplicable
NotApplicable's picture

Amazing how some people completely reverse causality in order to make their incoherent views work.

Don't you realize that "we the people" ARE the private sector? Meanwhile, the government is merely the most organized form of crime, albeit with cheaper suits.

Wed, 06/12/2013 - 12:52 | Link to Comment smartstrike
smartstrike's picture

You are the one who is deluded. There is no such a thing as a government that is not aligned with some business interest. In fact, the same people who run the government move back and forth between academia, business and government. In my small city, all the council members were either developers, real estate agents or small business owners. It's like this all through out America! These people are only there to funnel contracts to their own businesses and affiliates.

 

I assume you are chest pumping Ayn Rand type and you are attempting to disassociate government from the PRIVATE sector in order to blame it for private sector failings just like Martin Armstrong is doing. Is the Pentagon running the MIC? Who is running NSA other than Private sector contractors? Who runs EPA? Who prints money and dictates ZIRP policies--the government? What government does Bernanke work for, or how about Larry Summers?

There is no difference between government and the private sector, that's what crony capitalism is all about. 

Wed, 06/12/2013 - 11:01 | Link to Comment Midasking
Midasking's picture

Morning Tyranny Update http://tinyurl.com/n8hmfya

Wed, 06/12/2013 - 10:49 | Link to Comment falak pema
falak pema's picture

I seem to remember that Friedman won with BW revoke of 1971. Floating rates was his version of treating Keynesianism and dollar gold fixed exchange standard as garbage, and monetary interest as the true adjustment variable to keep floating currencies on economic par.

But floating rates and OPEC cartel blew inflation sky high and Volcker then pulled the gun on monetary expansion to kill oil prices and growth, under deflation.

What saved the day was supply side deregulation. We left the Friedman world, inspite of what RR promised : less governement spending, it went ballistic for MIC ventures,  and went more into asset bubble inflation all the while fueling the fiat pump on ZIRP; the latter being the biggest insult to Friedmanism enforced by his ex Chicago pupil Greenspan. 

Wed, 06/12/2013 - 10:48 | Link to Comment foytik
foytik's picture

Debt ceiling not 16.394 trillion. Check the Daily Treasury Statements, It's been increased to $16,699,421,095,673.60


Wed, 06/12/2013 - 11:47 | Link to Comment NotApplicable
NotApplicable's picture

That sixty cents is some significant shit!

Wed, 06/12/2013 - 10:38 | Link to Comment RaceToTheBottom
RaceToTheBottom's picture

I found it hard to even make it through the sentences; the style of writing was so childish, any meaning was lost.

Why not talk about the edicts of his economics, rather than uncle Milton?  The dumbing down of America is accelerating

Wed, 06/12/2013 - 10:35 | Link to Comment Turin Turambar
Turin Turambar's picture

Friedman is great for a quote, but overrated in the defense of liberty. For heaven's sake, the man supported fraudulent fiat currency. Vouchers? Give me a break. I'll stick with Rothbard and the Mises Institue rather than some utilitarian compromising with the state.

Wed, 06/12/2013 - 11:12 | Link to Comment marathonman
marathonman's picture

Rothbard was the man!  He was the true 'Enemy of the State'.  That's what I love about him, God rest his soul.

Wed, 06/12/2013 - 10:27 | Link to Comment Free Wary
Free Wary's picture

Stopped reading when you said "inflation is down"

Wed, 06/12/2013 - 11:46 | Link to Comment NotApplicable
NotApplicable's picture

Hey Pivotfarm, you spelled Fraudman wrong!

Do NOT follow this link or you will be banned from the site!