Milton Friedman Inflation Quotes

Inflation is taxation without representation.

Inflation is always and everywhere a monetary phenomenon.

Inflation is the one form of taxation that can be imposed without legislation.’ —MILTON FRIEDMAN

Inflation is taxation without legislation

Inflation is caused by too much money chasing after too few goods.

Higher government spending will not lead to more rapid monetary growth and inflation if additional spending is financed either by taxes or by borrowing from the public. In that case, government has more to spend, the public has less. Higher government spending is matched by lower private spending for consumption and investment. However,

On the contrary, the inflation itself is partly a response to the reaction. As it has become politically less attractive to vote higher taxes to pay for higher spending, legislators have resorted to financing spending through inflation, a hidden tax that can be imposed without having been voted, taxation without representation. That is no more popular in the twentieth century than it was in the eighteenth.

One reason inflation is so destructive is because some people benefit greatly while other people suffer; society is divided into winners and losers. The winners regard the good things that happen to them as the natural result of their own foresight, prudence, and initiative. They regard the bad things, the rise in the prices of the things they buy, as produced by forces outside their control. Almost everyone will say that he is against inflation; what he generally means is that he is against the bad things that have happened to him.

Five simple truths embody most of what we know about inflation: Inflation is a monetary phenomenon arising from a more rapid increase in the quantity of money than in output (though, of course, the reasons for the increase in money may be various). In today’s world government determines—or can determine—the quantity of money. There is only one cure for inflation: a slower rate of increase in the quantity of money. It takes time—measured in years, not months—for inflation to develop; it takes time for inflation to be cured. Unpleasant side effects of the cure are unavoidable.

There is an excellent short book (126 pages) by Faustino Ballvè, Essentials of Economics (Irvington-on-Hudson, N.Y.: Foundation for Economic Education), which briefly summarizes principles and policies. A book that does that at somewhat greater length (327 pages) is Understanding the Dollar Crisis by Percy L. Greaves (Belmont, Mass.: Western Islands, 1973). Bettina Bien Greaves has assembled two volumes of readings on Free Market Economics (Foundation for Economic Education). The reader who aims at a thorough understanding, and feels prepared for it, should next read Human Action by Ludwig von Mises (Chicago: Contemporary Books, 1949, 1966, 907 pages). This book extended the logical unity and precision of economics beyond that of any previous work. A two-volume work written thirteen years after Human Action by a student of Mises is Murray N. Rothbard’s Man, Economy, and State (Mission, Kan.: Sheed, Andrews and McMeel, 1962, 987 pages). This contains much original and penetrating material; its exposition is admirably lucid; and its arrangement makes it in some respects more suitable for textbook use than Mises’ great work. Short books that discuss special economic subjects in a simple way are Planning for Freedom by Ludwig von Mises (South Holland, 111.: Libertarian Press, 1952), and Capitalism and Freedom by Milton Friedman (Chicago: University of Chicago Press, 1962). There is an excellent pamphlet by Murray N. Rothbard, What Has Government Done to Our Money? (Santa Ana, Calif.: Rampart College, 1964, 1974, 62 pages). On the urgent subject of inflation, a book by the present author has recently been published, The Inflation Crisis, and How to Resolve It (New Rochelle, N.Y.: Arlington House, 1978). Among recent works which discuss current ideologies and developments from a point of view similar to that of this volume are the present author’s The Failure of the “New Economics”: An Analysis of the Keynesian Fallacies (Arlington House, 1959); F. A. Hayek, The Road to Serfdom (1945) and the same author’s monumental Constitution of Liberty (Chicago: University of Chicago Press, 1960). Ludwig von Mises’ Socialism: An Economic and Sociological Analysis (London: Jonathan Cape, 1936, 1969) is the most thorough and devastating critique of collectivistic doctrines ever written. The reader should not overlook, of course, Frederic Bastiat’s Economic Sophisms (ca. 1844), and particularly his essay on “What Is Seen and What Is Not Seen.” Those who are interested in working through the economic classics might find it most profitable to do this in the reverse of their historical order. Presented in this order, the chief works to be consulted, with the dates of their first editions, are: Philip Wicksteed, The Common Sense of Political Economy, 1911; John Bates Clark, The Distribution of Wealth, 1899; Eugen von Böhm-Bawerk, The Positive Theory of Capital, 1888; Karl Menger, Principles of Economics, 1871; W. Stanley Jevons, The Theory of Political Economy, 1871; John Stuart Mill, Principles of Political Economy, 1848; David Ricardo, Principles of Political Economy and Taxation, 1817; and Adam Smith, The Wealth of Nations, 1776.

Inflation’, wrote Milton Friedman in a famous definition, ‘is always and everywhere a monetary phenomenon, in the sense that it cannot occur without a more rapid increase in the quantity of money than in output.

Inflation’, wrote Milton Friedman in a famous definition, ‘is always and everywhere a monetary phenomenon, in the sense that it cannot occur without a more rapid increase in the quantity of money than in output.’ What

In the course of the 1960s, the left adopted almost wholesale the arguments of the right,” observed Daniel Patrick Moynihan, a domestic policy adviser to all three of the decade’s presidents. “This was not a rude act of usurpation, but rather a symmetrical, almost elegant, process of transfer.” Exaggerating for effect—but not to the point of inaccuracy—Moynihan remembered that by decade’s end, “an advanced student at an elite eastern college could be depended on to avow many of the more striking views of the Liberty League and its equivalents in the hate-Roosevelt era; for example that the growth of federal power was the greatest threat to democracy, that foreign entanglements were the work of demented plutocrats, that government snooping (by the Social Security Administration or the United States Continental Army Command) was destroying freedom, that the largest number of functions should be entrusted to the smallest jurisdictions, and so across the spectrum of this viewpoint.”2 Driven primarily by the expanding war in Vietnam, this new current on the left took up individualistic and anti-statist themes that were once the province of the right. Another part of this convergence was the rise of the economics profession. The new economics appeared a success on its own terms; growth had picked up across the Kennedy years. By 1965, GNP had increased for five straight years. Unemployment was down to 4.9 percent, and would soon drop below the 4 percent goal of full employment. As James Tobin reflected, “economists were riding the crest of a wave of enthusiasm and self-confidence. They seemed, after all, to have some tools of analysis and policy other people didn’t have, and their policy seemed to be working.”3 With institutional economics a vanquished force, most economists accepted the tenets of the neoclassical revolution: individuals making rational choices subject to the incentives created by supply and demand. Approaching policy with an economic lens cut across established political lines, which were often the creation of brokered coalitions, habit, or historical precedent. Economic analysis was at once disruptive, since it failed to honor these accidental accretions, and familiar, since it spoke a market language resonant with business-friendly political culture.4 Amid this ideological confluence, Friedman continued his dour rumblings and warnings. Ignoring the positive trends in basic indicators of economic health, from inflation to unemployment to GDP, he argued fiscal demand management was misguided, warned Bretton Woods was about to collapse, predicted imminent inflation, and castigated the Federal Reserve’s basic approach. Friedman’s quixotic quest—and the media attention it generated—infuriated many of his peers. Friedman, it seemed, was bent on fixing economic theories and institutions that were not broken.

It was obvious to all who knew him that Friedman loved being the smartest guy in the room. It was also clear he loved to smash idols. Pigou, Keynes, Samuelson—his whole life, names others worshipped were his targets. But underneath all this, imperceptibly running through the years, was a contrapuntal desire for a wise man, a counselor, a superior, someone to admire and esteem. Burns, arriving in the fatherless Friedman’s life just as he considered his professional future, had played this role for decades. “Arthur, there remains no one whom I so admire + feel so close to—Rose only excepted—and so hate to hurt,” Friedman told him in his closing lines.34 As a fellow Jewish man with immigrant roots who had risen fast and far, Burns was in some ways a natural father figure, but in other ways he never quite fit the role. Friedman’s closest relationships were always with those who shared his fundamental orientation to economics and politics. True, he retained cordial relationships with his opponents. But friendship, as it developed in his life, was rarely about the simple joy of companionship. From his student days in Chicago to his marriage with Rose, Friedman had always blended ideological, professional, and personal ties. Burns’s speech, with its reference to cost-push inflation, revealed a truth that was perhaps the most painful of all: Burns did not accept Friedman’s theory of inflation.