Milton Freedman is famous for his definition, description of what inflation is. Milton Freedman was a brilliant debater, and a brilliant economist, but like the rest of us he had limitations.
“The death of Milton Friedman on November 16, 2006, led Federal Reserve Chairman Ben Bernanke to remark that the “direct and indirect influences of his thinking on contemporary monetary economics would be difficult to overstate” and President Bush to note that “his writings laid the groundwork that transformed many of the world’s central banks.” Undoubtedly a major factor underpinning these assessments is the overwhelming influence that Friedman’s work has had on the way that economists and policymakers look at inflation.”
“As Friedman emphasized, “Inflation is an old, old disease. We’ve had thousands of years of experience of it. There is nothing simpler than stopping an inflation—from the technical point of view.”1That remedy took a specific form: “The only cure for inflation is to reduce the rate at which total spending is growing.” From, “Milton Friedman on Inflation,” by Edward Nelson
“Things go sour in monetarily speaking, either when the rate of spending is excessive, so there's toomuchmoneychasing after too few goods in the famous formulation of Milton Freedman, or when the opposite happens when spending declines rapidly.” https://www.libertarianism.org/media/free-thoughts/how-federal-reserve-works.
It is obvious that Freedman had a monumental effect on modern monetary philosophy. The question is, regardless of whether you respect his influence, was it the truth, the whole truth, and nothing but the truth?
Freedman’s formula definitely has an effect on the trade value of currency, but does it really have an effect on the raw value of currency?
Let’s think for a minute. I’lll forward an example that may help you see through the clouds that have been inflated around the principals of monetary economics, and inflation specifically.
Let’s pretend that one entity has earned, and has in their possession 1/5 of all the money in America. In this example, the numerator is one, and the denominator is five.
This means that the whole is divided into five parts, and some person, or entity is in possession of one of those five parts of the whole.
Then let’s posit that someone has, or assumes the right, and authority to change the denominator from a five to a ten. Now our entity still has one part, but instead of one fifth, they have one tenth. Surely you can understand that one fifth is of much greater value than one tenth.
Every time the number of “dollars” in circulation is increased, the denominator, (as in our illustration,) is increased, and the value of the numerator, (that currency which we possess, representing the time, and resources that we’ve expended,) decreases in a systematic way, and at mathematical rate. How many items, or resources available, have no bearing on the value of the currency in our possession.
The Freedman formula only confuses the issue, and makes the perpetration of the crime more acceptable.
The field of economics is merely a means by which intelligent people might manipulate data so that the victims of the fraud might be too confused to understand what has happened. It’s a lot like a shell game.
God bless you, Dave