Saturday, November 25, 2006
Democrats, the Fed, and Milton Friedman
Liberal Democrats are economic ignoramuses and they hope that the voters are too.
Neither the Democratic Party left wing, nor the Fed has learned the fundamental truth documented by the late Milton Friedman and Anna Schwartz in A Monetary History of the United States, 1867-1960.
Mr. Friedman, who died November 16, 2006, effectively eviscerated Keynesian economics, which was the academic foundation of New Deal socialistic statism and remained the economic orthodoxy of the Democratic Party after World War II.
One of Professor Friedman's messages is that, when the government attempts to regulate the economy it almost always does more harm than good. Another is that the economy will grow faster and more steadily when the Fed acts to keep the money supply in a stable relationship to GDP. This promotes price stability, i.e., the absence of inflation.
The real economy grows and more jobs are created, not as a consequence of management by government planners, but because private businesses make long-term investments to produce more goods and services. As we saw in the 1930s Depression, businesses don't make long-term investments when taxes are being raised, inflation is rampant, and they are continually harassed by harmful rounds of government regulations.............
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