Monetarism Quotes

“macroeconomics”

“market monetarism”

“Wikipedia: Monetarism”

“Monetarism means honest money. It means that the money is backed properly by the production of goods and services.”

“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.”

“Friedman's failure to see that monetarism would ultimately lead to the excesses of Keynesian tinkering in the economy is tragic, but the failure of so many today to recognize this is without excuse.”

“Austrian theory, like the Keynesian and monetarist theories, can give a reason for the start of the Japanese recession.  Unlike the other schools, the Austrian policy recommendation of laissez-faire has not been tried.”

“Milton Friedman and Anna Schwartz’s monumental Monetary History of the United States eventually helped to displace Keynesian interpretations with a monetarist interpretation, especially after the stagflation of the 1970s worked to discredit Keynesian macroeconomics.”

“Gore Vidal, the American writer, once described the American economic system as 'free enterprise for the poor and socialism for the rich'.  Macroeconomic policy on the global scale is a bit like that.  It is Keynesianism for the rich countries and monetarism for the poor.”

“In the last decade or two there has grown up in this country, principally under the leadership of Professor Milton Friedman, a school calling itself the Monetarists.  The leaders sometimes sum up their doctrine in the phrase: "Money matters," and even sometimes in the phrase: "Money matters most."”

“Moreover, in 'macro', the scholastics, beginning with Buridan and culminating in the sixteenth century Spanish scholastics, worked out an 'Austrian' rather than monetarist supply and demand theory of money and prices, including interregional money flows, and even a purchasing-power parity theory of exchange rates.”

“In one respect, however, I agree that monetarism was wrong, namely, to the extent that it failed to recognize the need to allow inflation to occur to the extent that it was solely due to falling output or productivity—a case I have argued, along with the symmetrical one for letting prices fall as productivity improves, in my IEA pamphlet Less Than Zero.”

“No monetarist, certainly not Friedman, welcomed this side-effect of monetary restraint.  But then again, had Friedman been listened to earlier (and had the likes of Paul Samuelson been ignored), things would never have come to this tragic stage.  By way of analogy, should we blame those who would end the war in Iraq, and who opposed it all along, for the tragic consequences that are likely to follow any rapid U.S withdrawal?”

“The Austrian description of the boom's timing and cause seems similar to the monetarist theory, but there is an important difference.  Both schools agree that the contraction of the monetary expansion triggered the recession, but the monetarists view this contraction as something that should be avoided so that prosperity can continue.  In Austrian theory, the contraction is necessary to restore balance to the real economy—the preceding expansion is the problem.  This is one reason why the two schools differ in their policy recommendations.”

“While many of the conflicting claims can be reconciled in terms of the short-run and long-run orientation of Keynesians and monetarists, respectively, and in terms of their contrasting philosophical orientations, neither vision takes into account the workings or failings of the market mechanisms within the investment aggregate.

Austrian macroeconomics is set apart from both Keynesianism and monetarism by its attention to the differential effects of interest-rate changes within the investment sector, or—using the Austrian terminology—within the economy's structure of production.”

“It is indeed true that the reduction of inflation came at a big price—that Volcker's tightening, for instance, succeeded in lowering inflation only in the wake of a severe recession.  But this possibility was, first of all, one concerning which monetarists were perfectly aware: they understood the danger that, once inflation, and accelerating inflation especially, came to be anticipated by the public, putting the breaks on money growth would result in prices and wages continuing for some time to rise beyond their new, less-rapidly rising equilibrium values, with a consequent rise in unemployment.”

“One of the superb features of Cantillon's Essai is that he was the first, in a pre-Austrian analysis, to understand that money enters the economy as a step-by-step process and hence does not simply increase or raise prices in a homogeneous aggregate.⁸  Hence he criticized John Locke's naive quantity theory of money—a theory still basically followed by monetarist and neoclassical economists alike—which holds that a change in the total supply of money causes only a uniform proportionate change in all prices.  In short, an increased money supply is not supposed to cause changes in the relative prices of the various goods.”

“Accounting for the artificial boom and the consequent bust is not part of Keynesian income-expenditure analysis, nor is it an integral part of monetarist analysis.  The absence of any significant relationship between boom and bust is an inevitable result of dealing with the investment sector in aggregate terms.  The analytical oversight derives from theoretical formulation in Keynesian analysis and from empirical observation in monetarist analysis.  But from an Austrian perspective, the differences in method and substance are outweighed by the common implication of Keynesianism and monetarism, namely, that there is no boom-bust cycle of any macroeconomic significance.”

“Your friend, rather perversely I think, refers to the "disastrous results" that followed the monetary tightening of Volcker and other more monetarist-minded central bankers without even hinting at the facts that that the tightening was aimed at bringing down inflation rates, and that it succeeded remarkably well in doing precisely that.  In other words, the tightening did precisely what monetarism said it would do, and what monetarists' critics at the time, wedded to the view that monetary policy was ineffective, and that inflation was entirely caused by OPEC (or by unions, or by anything except monetary policy) insisted it could not do.  And yet your friend imagines that the experience proved the monetarists wrong!”

“Christiernin, however, was far from a hard-core hard-money man.  He defended bank notes as useful, increasing activity and employment, and opposed deflation because, he pointed out, prices and wages were sticky downward.  It is doubtful, however, that downward stickiness could last for long in the eighteenth century.  But Christiernin's main objection to deflation was that his ideal was not sound, metallic money but a pre-Friedmanite desire to stabilize the value of the daler and make the price level constant.  In pursuit of that goal, he urged open market operations by the central bank.  Furthermore, again in anticipation of the monetarists, he admittedly preferred inflation to deflation, if that was the choice.”