This Sunday is the 110th anniversary of Milton Friedman’s birth. Born July 31, 1912, the Nobel Prize economist died in 2006 at age 94. His contributions to classical liberalism are as pertinent today as ever.
Previous IER posts have celebrated Friedman’s insights regarding energy, climate, and government. The present post focuses on Friedman’s thoughts about inflation and government spending, which are part of the ongoing energy and climate debate.
Climate policies drive up energy prices and add to budget deficits, which the government then monetizes to create a general price inflation. Yet Biden’s special climate envoy, John Kerry, recently stated, “the steps we need to take to deal with the climate crisis, most of them are, in fact, anti-inflationary.”
Elaboration, please? … Hearing none, what is the real cause of inflation, and what is its relation to government deficits? The following Friedman quotations take it from here.
Cause of Inflation
Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output…
There is only one cure for inflation: a slower rate of increase in the quantity of money.
No government is willing to accept responsibility for producing inflation…. Government officials always find some excuse—greedy businessmen, grasping trade union’s spendthrift consumer, Arab sheikhs, bad weather, or anything else that seems even remotely plausible.
Danger of Inflation
Inflation is a disease, a dangerous and sometimes fatal disease, a disease that if not checked in time can destroy a society.
The history of mankind is the history of money losing value.
Inflation is taxation without legislation.
Financing government spending by increasing the quantity of money looks like magic, like getting something for nothing.
Central Banking Problem
The power to determine the quantity of money… is too important, too pervasive, to be exercised by a few people, however public-spirited…. There is no need for such arbitrary power.
[T]he burden of government is not measured by how much it taxes, but by how much it spends.
The deficit is an indirect method of taxation. Of course, politicians prefer to borrow instead of tax because then someone down the road has to deal with the consequences.
[W]hat is important is cutting government spending, however spending is financed. A so-called deficit is a disguised and hidden form of taxation. The real burden on the public is what government spends (and mandates others to spend).
Politicians will always spend every penny of tax raised and whatever else they can get away with.
[I]f I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government.