Thursday, March 24, 2011

Milton Friedman On The Fed's Ability To Control Interest Rates

On February 14 I wrote a post highlighting Milton Friedman’s “Free to Choose” television series of 1980.

From time to time I plan on commenting on various material contained therein as much of it is highly relevant to issues we are currently encountering.

His following comments are particularly noteworthy given today's economic environment and intervention activities such as QE2:

First, in his "Free to Choose" book, Chapter 9, p. 266:
"...the Fed has given its heart not to controlling the quantity of money but to controlling interest rates, something that it does not have the power to do."
In Volume 9 of his "Free to Choose" television series, Friedman makes a variety of interesting comments from roughly the 37:22 mark to 38:13.  At roughly 37:45 he makes a comment about ideas to "finance the deficit by printing money" and then at 37:57 makes this comment:
"The Federal Reserve's activities in trying to hold down interest rates have put us in a position where we have the highest interest rates in history.  It's another example of how - of the difference - between the announced intentions of a policy and the actual result."
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The Special Note summarizes my overall thoughts about our economic situation 

SPX at 1297.54 as this post is written

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