Sometimes I think I’m living in an alternate universe. Today we were treated to the specter of Fed Chairman Ben Bernanke saying with a straight face that Milton Friedman would approve of the Fed’s unprecedented degree of money creation:
QUESTION: Mr. Chairman, this is a city where the ideas of Milton Friedman continue to get a lot of attention and one of our questions via Twitter asks how you think Milton Friedman might have viewed the Federal Reserve’s evolving role over the last five years.
Ben Bernanke, Chairman of the Federal Reserve: I think Milton Friedman — I’m a very big fan of Milton Friedman. I knew Friedman for a very long time. I was a colleague of his for a while at Stanford. I’ve had many opportunities to talk to him. I spoke at his 90th birthday party. I spoke at some other events in his honor. He’s a terrific economist, very insightful. I think he would have supported what we are doing.
Bernanke also said that Friedman would have been “very comfortable” with the support the Fed is adding to the economy.
This is delusional. Nobody was more critical of the government’s affinity for printing money, which he called a hidden tax, than Friedman. Here’s a short video in which Friedman discusses the direct relationship between monetization and inflation, an issue on which Governor Palin has been at the forefront:
This next video is a bit longer, but features Friedman giving a bit more entertaining explanation of the relationship between inflation and the printing of money:
Question: Does this sound like a guy who would approve of what Bernanke is doing in any way, shape, matter or form? I think not. Simply put, Friedman’s famous quantity theory of money tells us that whenever money is created more quickly than the supply of goods and services, inflation is the inevitable result. While Friedman did see a role for the Fed in certain limited circumstances (1929, for example), for anyone to suggest he would be in any way “supportive” or ”comfortable” with what Bernanke’s doing today is pure poppycock. Click the image below to watch Bernanke’s comments.