Word: friedman
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...Keynesian faith, and they lean toward the Democratic Party. The monetarists, on the other hand, tend to identify with Republicans. The ensuing clash of philosophies thus involves high policy, politics and the fervor of a religious schism. Nixon's half-successful jawboning against steel-price increases suggests that Friedman may have lost his most illustrious convert. After his recently televised "conversation," the President remarked casually to a startled TV commentator: "I am now a Keynesian...
...particularly nettlesome question is: do Friedman's theories suffice in today's part-free, part-regulated U.S. economy, where industrial oligarchies can virtually dictate some prices and monopolist labor unions can virtually dictate some wages? Such "important structural changes" in the economy "make Friedmanite solutions unrealistic," argues Economist John R. Bunting, president of First Pennsylvania Banking & Trust Co. "It would be wonderful if just fixing money-supply growth within an appropriate range would make inflation and other economic problems disappear...
...Friedman insists that the Nixon Administration has actually had "enormous success" in trying to arrest inflation by following his monetary prescription. "The medicine is working on schedule," he told TIME Correspondent Jacob Simms. "We have been attacking the severest U.S. inflation on record except for times of major war, but the recession is the mildest in the postwar...
...Friedman's analysis, a predictable slowdown in the economy began about nine months after the Federal Reserve started tightening up on the growth of money supply at the beginning of 1969. After that lag, Friedman calculates, it takes an average of still another six to nine months more before reduced output -and increasing joblessness-begin to affect prices. *Last week the Commerce Department reported that in 1970 the nation's real output of goods and services fell by .5%, but prices rose 5.3%, the steepest one-year advance since 1951. Even so, Friedman tirelessly maintains that the momentum...
...Friedman admits that he expected the rate of price increases to taper off faster than it has. He made a bad mistake last February when he predicted that overall inflation would decrease to a 3% annual rate by the end of 1970. On the other hand, he was correct in predicting that a recession would strike, though a bit too pessimistic about its severity. His recent record as a forecaster may be irrelevant to the validity of his main theory; yet Friedman's ideas gained popularity partly because he and other monetarists proved to be right in earlier forecasts...