Re: Speaking of uncle Miltie

["Andrew Hagen" <xah@xxxxxxxxxxxxx>]

Uncle Miltie is wedded to the fallacy that stable prices are a panacea
for other problems. Instead, shouldn't the goal of a true monetarist be
stable price changes? That is, whether inflation is 0% or 5% or 100%
per year, the exact percentage is unimportant, so long as the same rate
applies every year, throughout the sectors of an economy, so that all
economic actors will be able to adjust in relation to an expected
change.

Maybe I'm wrong here, but I think one of the causes of the US economic
crisis is Greenspan & Co's effort to sharply increase interest rates in
1999 and 2000. At that time, the prospects were vary low of any sharp
deviation from the accustomed 2-4% inflation rate. Maybe Greenspan
wanted to achieve 0% inflation, but in so doing, has helped ruin his
own crown jewel: the new economy.

A further regrettable impact of Greenspan's hawkish anti-inflation
policy has been to overly strengthen the dollar. This has contributed
to the ongoing huge current account deficit, and correspondingly the
continued eroding of the important manufacturing sector in the American
economy. (I wouldn't call for a drastic decline in the dollar's value.
A modest reduction since 1999 would have been successful).

Andrew Hagen
xah@xxxxxxxxxxxxx

> <http://www.ireland.com/newspaper/finance/2001/0905/fin18.htm>
>Wednesday, September 5, 2001
>US economist expounds
>on great euro mistake
>So what would the correct monetary policy for Ireland be?
>
>"Stable prices - the general recipe which has been most successful in
>most other countries," [Milton Friedman] replied.
>"The first example I guess is New
>Zealand which targets inflation at about 2 per cent to allow for the
>deficiencies in the index."