Thursday, June 16, 2011

Bitcoin: What would Milton Friedman Say?

From wikipedia (HT)

Friedman believed that if the money supply was to be centrally controlled (as by the Federal Reserve) that the preferable way to do it would be with a mechanical system that would keep the quantity of money increasing at a steady rate.

Note he advocates a steady rate, if the money supply was to be centrally controlled. I wonder what he'd think of Bitcoin's deflationary nature?

However, instead of government involvement at all, he was open to a "real," non-government, gold standard where money is produced by the private market: "A real gold standard is thoroughly consistent with [classical] liberal principles and I, for one, am entirely in favor of measures promoting its development."

It sounds like he's for private banking backed by gold, but..

He did however add this caveat, "Let me emphasize that this note is not a plea for a return to a gold standard.... I regard a return to a gold standard as neither desirable nor feasible—with the one exception that it might become feasible if the doomsday predictions of hyperinflation under our present system should prove correct.

Inflation like this MIT estimate? An elaboration:

A real honest-to-God gold standard is not feasible because there is essentially no government in the world that is willing to surrender control over its domestic monetary policy

So he was for a steady rate of monetary growth, if centrally controlled. He was for gold, but didn't know how to get there as no government would surrender control.

Now there's the potential to take it back, weather they surrender it or not.

I'm left with more questions than answers.

1 comment:

  1. This is what he said before Bitcoin was invented