AS,
A MF quote:
Why should they also be accepted by private persons in private transactions in exchange for goods and services?
The short answer�and the right answer�is that private persons accept these pieces of paper because they are confident that others will. The pieces of green paper have value because everybody thinks they have value. Everybody thinks they have value because in everybody's experience they have had value...
Money Mischief (1992), Ch. 2 The Mystery of Money
So what happens when folks lose that belief? That thought is already with us and is a growing concern in the US.
MF charted the course and set the US on its current tack.
Milton Freidman took the easy way out and traded away long term stability for short term gains. May have been in the pocket of the bankers and politicians. He was pro debt and pro inflation but, in his favor, he did seem to know that limits existed. That seems forgotten now.
Debt does not go away. It is always paid. By someone in some way.
TF
"The pieces of green paper have value because everybody thinks they have value"
I'd make one small modification to the above.
The pieces of green paper have value because everybody's
thinks they have value agreed to accept them as a medium of exchange.
We all know those little green slips of paper have not real value. We've all just agreed to use them instead of barter.
As for Milton Friedman believing in inflation, he was in favor of a Constitutional Amendment limiting the growth of the money supply, so to say he was in favor of inflation is just not true.
AS,
I wonder what he meant when he said this:
Inflation is always and everywhere a monetary phenomenon in the sense that it is and
can be produced only by a more rapid increase in the quantity of money than in output. �
A steady rate of monetary growth at a moderate level can provide a framework under which a country can have little inflation and much growth. It will not produce perfect stability; it will not produce heaven on earth; but it can make an important contribution to a stable economic society.
The Counter-Revolution in Monetary Theory (1970)
This is what we did and it got out of hand.
From another article on MF:
"Friedman was the main proponent of the monetarist school of economics. He maintained that there is a close and stable association between inflation and the money supply, mainly that inflation could be avoided with
proper regulation of the monetary base's growth rate. He famously used the analogy of "dropping money out of a helicopter.",[40] in order to avoid dealing with money injection mechanisms and other factors that would overcomplicate his models.
His protege Ben Bernanke famously quoted MF in regard to the use of helicopters.
I would think that he would not have favored the current financial shenanigans and debt, he did in fact favor inflation as a spur to growth. Just got out of hand when politicians got drunk on monetary excess and the bankers got into it.
TF
