Switching the printing press on
By Alberto Mingardi
“Inflation is a disease, a dangerous disease for a society, it is sometimes a fatal disease for a society.” This short video by Milton Friedman, dating back to the early 80s, is still well worth seeing. With his unsurpassed clarity, Friedman explains why inflation is a monetary phenomenon in a language easily accessible even to those completely unfamiliar with economic reasoning.
However, Friedman’s lesson is not easily learned. Inflation advocates tend to be liked by legislators, who love the idea of a tax being so effective and yet invisible, and are often favored by conspiring circumstances. This New York Times article provides us with a clear picture of the ongoing debate. As a European, my instinctive reaction was of gratitude for the existence of Germans, whose deep-rooted memory of hyperinflation makes any talk of a 6% inflation targeting by the ECB simply taboo.
Richard Ebeling has a most interesting comment on the New York Times article here. Ebeling is skeptical that “a little bit of inflation” can stay that little. In the last few years, the Fed got used to bold experiments in social engineering. And yet, the idea of stabilizing an inflation rate at 6% may be another step forward.
On the contrary, one may suggest that the need to ascertain the actual effects of recent “unconventional” policies on monetary aggregates should constrain the central bankers’ propensity to further experiments. A sort of precautionary principle, besides a preference for sound money, would suggest that.
Anyway, I recommend you watch Friedman’s video to the end. In the last two minutes, he gets briefly on the politics of inflation. You will see for yourself that times haven’t changed much, after all.