Framing the Dialogue

Money Mischief

Silver and gold, silver and gold
Ev’ryone wishes for silver and gold
How do you measure its worth?
Just by the pleasure it gives here on earth 

 

Actually according to economist Milton Friedman a lot of people wished for silver and gold as a monetary standard (bimetallism), but the gold standard was slowly and steadily adopted by the world. That is before “fiat” money (currency not backed by a commodity like gold or silver) became the rage and allowing governments to crank up the presses. These are my words not Friedman’s.

Money Mischief is a VERY detailed look at world-wide monetary policy. I found myself often lost in the detail of the book. The introduction to Chapter 4 noted that “This chapter is also highly technical and detailed. I suspect it will be of interest primarily to fellow practitioners of technical economics.” I grudgingly admit that I skipped the chapter.

I found the later chapters more in line with my level of economic acumen and offered interesting explanations of causes and cures for inflation. Do these quotes sound frighteningly like our future?

“I know of no example in history of a substantial inflation lasting for more that a brief time that was not accompanied by a roughly corresponding rapid increase in the quantity of money; and no example of a rapid increase in the quantity of money that was not accompanied by a roughly corresponding substantial inflation.”

“A more instructive analogy is one between inflation and alcoholism. When the alcoholic starts drinking, the good effects come first; the bad effects come only the next morning…and often cannot resist the hangover by taking ‘the hair of the dog that bit him.’ In both cases (alcoholism and increasing the quantity of money) it takes a larger and larger amount, of alcohol or of money, to give the alcoholic or the economy the same ‘kick.’ The cure is hard to take because this time the bad effects come first, the good effects later.”

Think back over your lifetime and the cycles that we have gone through.  We have spendthrift politicians printing money, then high inflation followed by some more responsible officials who do the dirty work, inflicting the “bad effect” only to be punished as “mean” during the next election cycle.  We again get the spenders and the cycle repeats.  We still have a lot to learn and Milton Friedman’s work are a good place to gain knowledge.  This book, however, is not for the faint of heart.

A while back I posted a series of short video clips about economic theory by Mr. Friedman.  The clips are well done and explain economics in plain English.  You can follow this link to that post.

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