re: Numerophilia

jimmy — Fri, 23 Jan 2009 15:11:51 GMT

I wasn't aware of Friedman's later suggestion - that would definitely bring him more in line with the Austrians since that would effectively be relinquishing control of the money supply.

You're right about it being primarily about real productive output as well. I was trying to show that increasing government expenditure and various other things that get included in the "GDP statistic" isn't the same thing as increasing production of those things that people really want and buy in the free market...

So where the Monetarists view the aggregate demand and aggregate GDP as the problem (and thus don't differentiate between the specific types of output or their desirability) the Austrians look a little more at the trees in the forest and say, hang on, sure you might have lackluster growth overall but that's because you're pouring all your cash into making ovens and you've got no one to make bread.

Shostak recently wrote an article, which I think is closely related to this topic, about "funding":

www.mises.org/.../3310

re: Numerophilia

DD — Thu, 22 Jan 2009 19:07:27 GMT

Doesn't all of this come down to the issue of "real savings"? Is it not true that the most basic fallacy of the monetarists is that they simply ignore the relationship between real savings and growth?

“Friedman believed that changes in the money supply could bring about changes in real productive output “

Yes, but didn’t he also suggest abolishing the Fed and replacing it with a mechanical “rule” to increase the money supply at a fixed rate (say 4% or so). By this, isn’t he then saying that the money supply growth rate is unrelated to economic growth, and in a way reinforcing the “Austrian” perspective?