Rand Paul is dead wrong about Milton Friedman

[question everything]

First, Rand Paul told Bloomberg Businessweek that he would prefer a deceased Milton Friedman in charge of the Federal Reserve "because then you probably wouldn't have much of a functioning Federal Reserve". Now, as a follow-up, he writes over at National Review Online that it "is a disservice to Milton Friedman's memory … to assert that he would be a Krugman-like advocate for quantitative easing."

Based on the BBW interview and his NRO piece, Paul doesn't seem to know or understand much about Milton Friedman's views on the Fed or monetary policy. The NRO piece is particularly egregious since Paul and his staff had time to research the issue and still failed to mention that Friedman had addressed specifically what a central bank should do when faced with a stagnant economy and very low interest rates. Here is what Friedman said, back in 2000, during a Q&A with economist David Laidler:

(snip)

[…] In 1989, the Bank of Japan stepped on the brakes very hard and brought money supply down to negative rates for a while. The stock market broke. The economy went into a recession, and it's been in a state of quasi recession ever since. Monetary growth has been too low.

Now, the Bank of Japan's argument is, 'Oh well, we've got the interest rate down to zero; what more can we do?' It's very simple. They can buy long-term government securities, and they can keep buying them and providing high-powered money until the high powered money starts getting the economy in an expansion. What Japan needs is a more expansive domestic monetary policy.

(snip)

Defenders of the Bank of Japan will say, 'How? The bank has already cut its discount rate to 0.5%. What more can it do to increase the quantity of money?' The answer is straightforward: the Bank of Japan can buy government bonds on the open market, paying for them with either currency or deposits at the Bank of Japan, what economists call high-powered money. Most of the proceeds will end up in commercial banks, adding to their reserves and enabling them to expand their liabilities by loans and open market purchases. But whether they do so or not, the money supply will increase.

(snip)

http://www.theguardian.com/commentisfree/2013/aug/13/rand-paul-milton-friedman-federal-reserve-chairman

[HubertHeaver]

1. I misunderstood your subject line.

I have a tendency to read only the first few words.

[question everything]

2. Sorry. When I post a story I use the source's title (nt)

[HubertHeaver]

4. My bad. Just the pitfalls of quasi-speed-reading.

Trying to read quickly, I miss very important qualifiers or read words that aren't even there.

[demwing]

3. You miss Paul's point

Milton Friedman is whomever they say he is, thought whatever they say he thought, and did whatever they say he did.

Facts are so 30 minutes ago. The currency of the moment is Spin.

[question everything]

5. Truthiness (nt)

[WeekendWarrior]

6. I only read half the headline and

almost burst into applause.

Oh, well.

[Adenoid_Hynkel]

7. Milton Friedman is a murderous POS

who worked with the dictator Pinochet to force Chile to adopt his Ayn Rand-ian economy whether they liked it or not.