My extremely annoying victory lap continues. David Beckworth recently had this to say about the debate over what Friedman would have thought about QE:
So the debate over what Milton Friedman would say continues to be debated by policymakers and other monetary luminaries. This debate started with an Op-Ed I coauthored with Will Ruger in the Investor’s Business Daily, received more attention from a similar article by David Wessel in the Wall Street Journal, and was further promoted by Terence Corcoran in the Financial Post. These articles upset the old school monetarists and apparently were discussed at a recent Karl Brunner conference where they were gathered.
BTW, I wasn’t the leak. David’s right that his article touched off the debate, but not the analysis. Here are four earlier posts I did suggesting Friedman would have favored monetary stimulus:
For the past several years I’ve been using this argument to criticize the Fed. Now Bernanke has made the same argument to defend the Fed:
In an essay in The Wall Street Journal on Thursday, Allan H. Meltzer, an economist at Carnegie Mellon University and the pre-eminent historian of the Fed, said that the Fed was stoking inflation to stimulate the economy, and that Mr. Friedman would never have supported such an effort.
That drew an emotional retort from Ben S. Bernanke, the Fed chairman and a scholar of the Depression.
“I grasp the mantle of Milton Friedman,” Mr. Bernanke told his colleagues on Saturday. “I think we are doing everything Milton Friedman would have us do.”
Mr. Bernanke said Mr. Friedman would have agreed that the Fed had a mandate to promote price stability and that “you don’t want inflation to be too high, but you also don’t want inflation to be too low.”
Because inflation, at just more than 1 percent, is too low, and because the economy and the money supply are growing very slowly, “even from a strict monetarist perspective, we need to do more,” Mr. Bernanke said.
Of course I can’t be sure that Friedman would favor monetary stimulus. But there is one thing I am confident of; he would not have opposed monetary stimulus in late 2008 and 2009, and supported it in 2010. He was a very logical thinker, and the case for monetary stimulus was clearly much stronger when prices and NGDP were falling in late 2008, than it is today. And Bernanke thinks we need more stimulus right now.
In 2009 I was using Friedman’s quotations to show why the Fed needed to ease. In 2009 those posts were used to bash the Fed. Now those same posts are seen as supporting the Fed. And I haven’t moved one bit. So what’s changed?
PS. The term ‘victory lap’ was ill-chosen; we are a long way from having adequate NGDP growth expectations.