Word: friedman
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Inflationary Engine. "Over the past years, the Federal Reserve has been an engine of inflation," complains Friedman. "Inflation is always and everywhere a monetary phenomenon, produced in the first instance by an unduly rapid growth in the quantity of money. I've sat in many a meeting with the Fed and argued with them. Three or four times I thought they had got the message, but every time they've strayed off the track...
...manipulate money. As he sees it, the board's seven governors-who now serve for 14 years-should have terms coinciding with that of the President who appoints them. Nixon recently went out of his way to ask Board Chairman William McChesney Martin to stay on, even though Friedman argues that the board under Martin has been wrong too often. Friedman now hopes that the chairman will retire before his term expires on Jan. 31, 1970. By law, Martin cannot be reappointed. Says Friedman: "It would be a very good thing if he went early...
...Friedman's main point is that the Reserve Board should simply let the money supply grow at a constant rate of about 5% a year, in line with the real growth of the nation's output of goods and services. An increasing number of experts agree with him. Last summer the congressional Joint Economic Committee urged the Federal Reserve to expand the money supply no less than 2% and no more than 6% a year. Last week 40 out of 71 economists who responded to a survey by a House subcommittee urged the Reserve Board to increase...
...international monetary affairs, Friedman contends that today's system of fixed exchange rates should be scrapped and that currencies should be free to fluctuate in value. That way, weak currencies would be penalized with instant if minor devaluations. Balance of payments problems would automatically disappear, along with the onerous controls and taxes imposed to try to solve them. Few policymakers accept such a radical proposal, but support is increasing for the related idea of permitting currencies to fluctuate within a "band" of 3% to 5% of their par value. Thus Friedman may not gain all of what he wants...
...sense, Friedman is like a Paris designer whose haute couture is bought by a select few, but who nonetheless influences almost all popular fashions. Richard Nixon's economists will not accept all of Milton Friedman's money-supply theory. They will, however, pay much more attention to monetary policy -and relatively less to taxes and Government spending. In that way, they hope to ease the economy onto a steadier, less inflationary course...