Actually, Friedman didn't endorse inflation targeting and wasn't in favour of inflation even at a low level. If you read "The Optimum Quantity of Money", he argues that a very deflationary price trend (such that the opportunity cost of holding cash is equal to the interest rate on government bonds) would be optimal. He endorsed price stability (i.e. inflation when output falls and deflation/price stability when output rises) as the best politically possible compromise.
@@steven21736 Note that real output (i.e. GDP) is measured using the price level from six months earlier in his chart, so it's NOT predicting inflation using (in part) that inflation.
Can you recommend a couple of books in order to understand your comment? I want to learn economics but the terminology and concepts aren't easy to grasp
6:00 - the chart stops before the CPI inputs were changed to make it seem like prices were not rising as much as they were. An increase in the money supply by 2% per year should be meant to more or less match an increase in output, and actually would probably result in lowering prices. A boom era in the US (when MOST people became wealthier) was always during monetary deflation, like 'gay 90's'. Today, boom eras are defined as asset price increases, which benefit FEW people, hurt most.
I’m gonna look it up but I wonder how the overall production of money in Brazil compares to the US during these periods. Or production of money per capital rather than production of money per output
@@Capital_Ideas1 Friedman has literally one of the most famous theories of the demand for money. It had some serious flaws (the effects of institutional changes in the financial system were more important than he thought and his preferred measures of money don't take into account the variable services provided by e.g. a time deposit vs. a checking account) but he DID have a theory.
Inflation is low? It isn't low. We've been expanding the money supply since the 2008 crash at a speed unheard of before the downturn. Price increases, which are the result of inflation have been climbing steadily since then. Have you seen the prices in housing, energy, services, collectibles, stocks, education and healthcare? The prices for most of these are beyond reach for most average citizens and their standard of living is being reduced due to the increase in prices brought on by the inflationary policies of the Fed.
how's inflation low in the US? asset inflation is there widening wealth gap in the US. Cost of living is going up. Debt levels are massively inflated. Low inflation? I'm confused sir.
He shrewdly games the economic system to his advantage. A dollar with high value will afford the very few goods and resources outstanding. So order to suppress the price of a good, which in turn dictates inflation itself & vice versa, you would limit the output and price of the good. He's more supply-side than demand-side economics.
He forgot to mention that the fed does not represent the government or the people but is a private entity that has its own interests. That is the root of all economic problems. Therefore economies with similar monetary policies will have ups and downs because of greediness and corruption from big government or big corporations.
Also, Bernanke's monetary theory fundamentally contradicts Friedman's (Bernanke is a creditist like the Austrian School rather than a monetarist, i.e. it's credit and bank assets that matter, not the quantity of money) so it would be very surprising if he agreed with Friedman's monetary policy proposals. (He doesn't agree with the Austrians either, but that's only because they're generally anarcho-capitalists and against the Fed entirely.)
i studied 3 types of inflation in my Alevels economics, one was due to supply of money..But then what about the demand pull inflation and cost push inflation ?
Talal Khan The relationship between quantity of money and inflation has been very weakened in recent years. You must remember that this presentation is from late 1970s, where it seemed as if the quantity of money was all that mattered.
The increase in price of a snow shovel in winter is just a result of a changing supply and demand resulting from changes in season. The price of snow shovels will decrease when they are no longer in demand.
No, because supply and demand aren't objectively fixed. If demand of snow shovels in the winter increases, the prices will rise to match. This in turn will prompt more people to enter the market of importing in, and distributing snow shovels, increasing the supply, until equilibrium. This is how and why price fixing, and laws aimed at stopping price gouging only hurt in the long run.
@@manuforever143 Or when the supply increases to match. When the profits of something shoot up, more investors enter. This in turn makes more supply available, reducing the price to match.
Although inflation is definitely a monetary phenomenon, however, the central bank being responsible for it may have been true at the time he said it, but right now it is mostly the responsibility of the commercial banks. Nowadays money is mostly created through loans, which means that who has the control over how much inflation we have are the commercial banks, not the CB.
lets say you have 100 dollars in the system. There's also 1 unit of food in the system. The price of that unit of food is now 100 dollars. Lets say you have 100 dollars in a system and you have a billion units of food in the system. That food is now pretty cheap. If you're saying the quantity of money is the only part of this equation you're a complete hack
Só let me see if i get this rigth, wath he saying is, the fed make the printer go brrrrrrrrrrr , bailout nation nonono banckruptation stonks only go up?
Wish you were here, Milton.
Love to hear this man talk. Brilliant
Abhiman Pt - not just the words but, the tone.
Venezuela has the highest inflation rate as of 2019, at approximately 445,482.00%. Imagine the graph for that country! Yikes.
Friedman : “We would have a chart for that, but there’s not enough room!”
De Los Reyes no need to imagine. Just go to goldprice.org
He is one of the greatest economist ,whose wisdom reign even today
The greatest
Milton Friedman was greatest economist. In how wonderful way he elaborate., I have never seen any such lecture.
Brilliant. I have no issue recognizing he is my superior in intellect.
Actually, Friedman didn't endorse inflation targeting and wasn't in favour of inflation even at a low level. If you read "The Optimum Quantity of Money", he argues that a very deflationary price trend (such that the opportunity cost of holding cash is equal to the interest rate on government bonds) would be optimal. He endorsed price stability (i.e. inflation when output falls and deflation/price stability when output rises) as the best politically possible compromise.
Do you know how Friedman measured "quantity of money per unit of output"?
@@steven21736 The quantity of money divided by real output.
@@steven21736 Note that real output (i.e. GDP) is measured using the price level from six months earlier in his chart, so it's NOT predicting inflation using (in part) that inflation.
Can you recommend a couple of books in order to understand your comment? I want to learn economics but the terminology and concepts aren't easy to grasp
6:00 - the chart stops before the CPI inputs were changed to make it seem like prices were not rising as much as they were.
An increase in the money supply by 2% per year should be meant to more or less match an increase in output, and actually would probably result in lowering prices.
A boom era in the US (when MOST people became wealthier) was always during monetary deflation, like 'gay 90's'.
Today, boom eras are defined as asset price increases, which benefit FEW people, hurt most.
I’m gonna look it up but I wonder how the overall production of money in Brazil compares to the US during these periods. Or production of money per capital rather than production of money per output
The US Dollar is an exception due to it being the world reserve currency.
Libertarians: No you can't print money without creating any income it will only lead to inflation.
Authoritarians: haha, money printer go brrr.
Helicopter money is the tool of choice for all politicians now!!!
Hi UR here as well 🙏🙏🙏
in the ratio "quantity of money per unit of output", where does the "units of output" number come from?
Nominal GDP divided by the price level.
At 4:55. Just for the record
I love it! The comments from the I am smarter than Mr Friedman, one day they might reflect on one self.
I wouldn't count on it. Those types of people seldom have the self awareness necessary to learn.
Even the printing press phenomenon failed to explain the consistent low inflation prevailing in the US ...It's really strange!!!
One variable Friedman excluded was demand for money. The supply of money versus the demand for money determines velocity.
@@Capital_Ideas1 Friedman has literally one of the most famous theories of the demand for money.
It had some serious flaws (the effects of institutional changes in the financial system were more important than he thought and his preferred measures of money don't take into account the variable services provided by e.g. a time deposit vs. a checking account) but he DID have a theory.
Inflation is low? It isn't low. We've been expanding the money supply since the 2008 crash at a speed unheard of before the downturn. Price increases, which are the result of inflation have been climbing steadily since then. Have you seen the prices in housing, energy, services, collectibles, stocks, education and healthcare? The prices for most of these are beyond reach for most average citizens and their standard of living is being reduced due to the increase in prices brought on by the inflationary policies of the Fed.
how's inflation low in the US?
asset inflation is there widening wealth gap in the US.
Cost of living is going up. Debt levels are massively inflated.
Low inflation? I'm confused sir.
Just wait a a little bit. Bubbles can grow very big.
He shrewdly games the economic system to his advantage. A dollar with high value will afford the very few goods and resources outstanding. So order to suppress the price of a good, which in turn dictates inflation itself & vice versa, you would limit the output and price of the good. He's more supply-side than demand-side economics.
He forgot to mention that the fed does not represent the government or the people but is a private entity that has its own interests. That is the root of all economic problems. Therefore economies with similar monetary policies will have ups and downs because of greediness and corruption from big government or big corporations.
Most bureaucrats are put in the fed by the government and its branches.
2% inflation goal and fighting deflation with inflation were Friedman's ideas. Bernanke got his monetary policy from Friedman.
Was it claimed in the video that this wasn't true?
What of cost push inflation eg fuel shortages?
Also, Bernanke's monetary theory fundamentally contradicts Friedman's (Bernanke is a creditist like the Austrian School rather than a monetarist, i.e. it's credit and bank assets that matter, not the quantity of money) so it would be very surprising if he agreed with Friedman's monetary policy proposals. (He doesn't agree with the Austrians either, but that's only because they're generally anarcho-capitalists and against the Fed entirely.)
i studied 3 types of inflation in my Alevels economics, one was due to supply of money..But then what about the demand pull inflation and cost push inflation ?
Costs don't determine prices, it's the other way around.
Talal Khan
The relationship between quantity of money and inflation has been very weakened in recent years. You must remember that this presentation is from late 1970s, where it seemed as if the quantity of money was all that mattered.
Couldn’t inflation because by an unexpected lake of supply. Isn’t this the classic example of increasing price of the snow shovel in the winter.
The increase in price of a snow shovel in winter is just a result of a changing supply and demand resulting from changes in season. The price of snow shovels will decrease when they are no longer in demand.
No, because supply and demand aren't objectively fixed.
If demand of snow shovels in the winter increases, the prices will rise to match. This in turn will prompt more people to enter the market of importing in, and distributing snow shovels, increasing the supply, until equilibrium. This is how and why price fixing, and laws aimed at stopping price gouging only hurt in the long run.
@@manuforever143 Or when the supply increases to match. When the profits of something shoot up, more investors enter. This in turn makes more supply available, reducing the price to match.
A true genius
⭐
Although inflation is definitely a monetary phenomenon, however, the central bank being responsible for it may have been true at the time he said it, but right now it is mostly the responsibility of the commercial banks. Nowadays money is mostly created through loans, which means that who has the control over how much inflation we have are the commercial banks, not the CB.
The central bank has the authority to alter the credit reserve ratio which has a direct impact on money supply.
Banks create money by fractional reserve banking...
Yes, but is regulated by the government. So at the end of the day is the government who decides how much money the banks will create
Qe infinity
Do not start your printers
♥
Friedman taught globalization, under the guise of economics. I am amazed at the number of people mistake it for economics.
louiethegreater He taught economics, and global trade leads to greater levels of prosperity and growth.
Oh look, one of the ignorant twats that think they are smarter than Friedman because they hang out in a political echo chamber.
haha printer go brrr
lets say you have 100 dollars in the system. There's also 1 unit of food in the system. The price of that unit of food is now 100 dollars. Lets say you have 100 dollars in a system and you have a billion units of food in the system. That food is now pretty cheap. If you're saying the quantity of money is the only part of this equation you're a complete hack
As of 2020, the US has printed trillions of dollars, but the rate of inflation is still not very high.
No longer. Today, banks can produce money. They do it all the time everyday.
The only money they get is from the FED
Só let me see if i get this rigth, wath he saying is, the fed make the printer go brrrrrrrrrrr , bailout nation nonono banckruptation stonks only go up?
Yugoslavia was more precisely socialist country and Switzerland is a place for hidden deposited money, not only a capitalist country.
Your point?
You cant really hide money in switzerland anymore, because other countries got angry at them. Malta is the new switzerland in those terms though
Milton Friedman teaches Globalism.
Buy Bitcoin!