Economist Milton Friedman Reading (Photo by Roger Ressmeyer/Corbis/VCG via Getty Images)
Corbis/VCG via Getty Images
There’s a George Will column somewhere that says if you want to make God laugh, tell him your plans. Economists never seem to get the joke.
Those on the “free market” side of the economist aisle still cling to the decidedly comical notion that they can and should design money. They call themselves “monetarists” and claim that non-inflationary growth will be the reward if central banks stick to their predetermined targets for money growth. Naaah. No house, street, town, city, state or country ever has to worry about how much or how little money is circulating.
This is because the production itself is 100% sure sign that there is enough money. It is always where the production is, and as if an “invisible hand” put it there. The sole purpose of production is to takeand with the latter in mind, there are always, always, always media exchange that facilitates the movement of products for products.
No central bank or any central authority could ever hope to plan the “supply” of mediums of exchange necessary to move commodities for commodities. To presume to design the so-called “money supply,” central banks would have to understand the infinite decisions taking place between billions of people, machines, and thinking machines every millisecond of every day on the road to production. Good luck there. Monetarism is reminiscent of the five-year plans of the old Soviet Union.
Not so says Jon Hartley, a Stanford economist known to work with members of the right. Even though Milton Friedman admitted in 2003 that monetarism was fake, and even though he was more honest about how fake it always was in private, Hartley is one of a growing number of PhDs trying to make fetch happen (look it up) as it were and revive the idea that economists know the money needs of the United States.
Even better, the ostensibly optimist at Hartley writes enthusiastically that newly crowned Fed Chairman Kevin Warsh shares his monetarist views. It’s hard not to laugh, if only because others on the right argue that Warsh is not a monetarist, but shares their opinions.
The good news is that it doesn’t matter. While Hartley writes in Civitas that Warsh will revive Friedman’s monetarism, given his recognition that “you can’t ignore the enormous amount of money flowing in the economy if you want to maintain long-term price stability,” reality will intrude. Prices are the result of infinite actions and decisions that take place every millisecond around the world. Warsh can’t get past that truth from the Marriner Eccles Building.
As for all this money allegedly leaving, one wonders if Hartley or Warsh are wondering why so little can be found in west Baltimore (MD), El Monte (CA), and Pueblo (CO), but so much in Atherton, Lake Forest, and New Canaan. Did the Fed do this and with their extra free time “refuel” Caracas, Pyongyang and Tehran? Once again, naaah.
There is production and nothing else. The money is where the production is. The Fed cannot change this truth. Likewise it cannot change the truth that production dictates how much or how little money circulates.
Precisely because production cannot be programmed from Commanding Heights, neither can money that has no purpose without production. Economists have God laughing.
