A cottage industry is building around the question: What would Milton Friedman do? With the U.S. Federal Reserve on the brink of announcing a new round of quantitative easing to pump a fresh supply of money into the U.S. economy, people are looking around for economic guidance. Prof. Friedman, the Nobel-winning free-market economist who died in 2006, earned his Nobel on the basis of his monetary-policy work. He was a “monetarist” who promoted the idea that steady and stable increases in the money supply were needed to keep growth high and inflation low.
The consensus, more or less, appears to be that Prof. Friedman would endorse what Fed chairman Ben Bernanke is expected to announce tomorrow: another massive increase in bond purchases. If the Fed buys up to half a trillion dollars’ worth of bonds, pushing interest rates even lower, the theory is that such quantitative easing will drive Americans into doing something constructive with their money, activity that would push up money-supply measures.
Here is the piece that Will Ruger and I did on the topic and here is the article by David Wessel.