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Hence why Friedman advocated for a continual, hands-off, of expanding the money supply by 2%-3% per year.
He wasn't so far off.
FA Hayek summarizes my critique of monetarism best:
"Its chief defects in any situation seems to me to be that by its stress on the effects of changes in the quantity of money on the general level of prices it disregards the harmful effects of the injections and withdrawals of amounts of money from circulation on the structure of relative prices and the consequent misallocation of resources and particularly the misdirection of investments which it causes."
FA Hayek summarizes my critique of monetarism best:
"Its chief defects in any situation seems to me to be that by its stress on the effects of changes in the quantity of money on the general level of prices it disregards the harmful effects of the injections and withdrawals of amounts of money from circulation on the structure of relative prices and the consequent misallocation of resources and particularly the misdirection of investments which it causes."
Let's clear something up. I am not defending monetarism. I was just interjecting where I saw misunderstanding.
Additionally, I understand Hayek's concern, but I don't see a solution. What is Hayek's solution to a growing economy with a limited money supply?
Also given the track record of his ideas and those of guy like Milton Friedman I'd take Keynes ideas any day of the week.
Milton Friedman corrected several of the Keynesian economic models and recalculated some of the relationships pivotal to that economic school. Modern Keynesians are using Friedman's recalculated models. By dismissing Friedman, you dismiss Keynes.
Let's clear something up. I am not defending monetarism. I was just interjecting where I saw misunderstanding.
Additionally, I understand Hayek's concern, but I don't see a solution. What is Hayek's solution to a growing economy with a limited money supply?
I admit I over simplified Milton Friedman's positions. It was on purpose.
I would assume Hayek, as others in the Austrian school, would argue that you should do nothing. According to the Austrian Business Cycle Theory credit crunch is an economy trying to self correct as a result of over expansion.
I would assume Hayek, as others in the Austrian school, would argue that you should do nothing. According to the Austrian Business Cycle Theory credit crunch is an economy trying to self correct as a result of over expansion.
I realize this, but what is their policy for an expanding economy? The monetarist advocate a steady increase in the money supply during expansion.
I do believe that they advocate nothing, and actually advocate deflation since wealth comes from producing more goods and services at more efficient levels and that money is just veil, but I am unsure of this.
I realize this, but what is their policy for an expanding economy? The monetarist advocate a steady increase in the money supply during expansion.
I do believe that they advocate nothing, and actually advocate deflation since wealth comes from producing more goods and services at more efficient levels and that money is just veil, but I am unsure of this.
You answered your own question (minus the uncertainty) and in a more articulate fashion than I would have. Thanks.
You answered your own question (minus the uncertainty) and in a more articulate fashion than I would have. Thanks.
lol....but Austrian would not advocate nothing regarding the money supply. In fact, they advocate increased competition.
I do believe that this stems backs from war mongering states, where the government monopoly on the money supply completely eroded the value of it. Centralized and war mongering governments left a bad taste in the freedom loving Austrians.
Austrians advocate competition, not centralization. How this would work out is yet to be seen since brave Americans are afraid to take risks, but instead look for guidance from the Federal Reserve and the Executive branch.
FA Hayek summarizes my critique of monetarism best:
"Its chief defects in any situation seems to me to be that by its stress on the effects of changes in the quantity of money on the general level of prices it disregards the harmful effects of the injections and withdrawals of amounts of money from circulation on the structure of relative prices and the consequent misallocation of resources and particularly the misdirection of investments which it causes."
Do you know of ANY economic theory that will counteract "misallocation of resources and particularly the misdirection of investments" in a democratic society with a capitalist economic system?
Including what Keynes said about military spending and wars being efficient means of growing the economy and providing jobs?
Would you care to cite a specifc source for that particular comment?
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