The consequences were you know catastrophic

Was finally somewhat told the death of Milton Friedman, as if the page had already been turned since long. Can not share the political conclusions that brilliant mind drew economic analysis. Can criticize his theories. But it cannot be denied that the father of monetarism was a great scholar that significantly advances the economic thinking. At a time where, for want of a minimum of economic culture, are told everything and anything to monetarism, it is not unnecessary to return on an also monumental work and the lessons that can learn. Because, if monetarism is a poorly understood thought, this is not a dead thought.

Unlike the Keynesian theory of money which promotes arbitration between financial assets and cash flow, Friedman explains that the currency exchange against all assets and that, therefore, it is the General level of prices which determines the value of the currency. For Keynes, monetary impulses through the interest rate. For Friedman, they are primarily by the level of prices. This vision of the as an intermediate currency of trade rather than as an asset under management of portfolio logic makes Friedman the heir to the neo-classical tradition of the quantitative theory of money. Unlike Keynes, Friedman distinguished dummy variables and the actual variables. As the neo-classical, he believes that in the end, once addressed all monetary illusion, an increase in the amount of money made up prices without affecting the actual variables. More money, it is ultimately more inflation and unemployment no less. It might be tempted to believe that he agrees with the old design of the currency as a veil on the real economy. His thinking is different. Indeed, if his money demand theory he deduced well that inflation is an essentially monetary phenomenon and that mastery of the continued increase in the General level of prices must be through the control of the money supply, it is inferred not that money is always neutral. Quite the contrary. The short term, the behaviour of money demand is not stable, or, to put it otherwise, currency circulation speed is hardly predictable short term. That is why it is impossible in his eyes fly with precision the economy with monetary policy. However, one would expect that the effects of this transient instability of money demand is low and quickly allayed. There is nothing. In his monetary history of the United States, Friedman argues the contrary. It shows that the worsening of the great depression in the early 1930s is due to an error of monetary policy of the US Federal Reserve, who contracted the money supply at the point where the very strong demand for money would, instead, required that the liquidity of banks has increased. The consequences were, you know, catastrophic. We measure how the concept of short term in economics is ambiguous. It also able to what extent can be the actual effects of a bad monetary cockpit.

It is on this historical analysis that Friedman supported his dislike for discretionary short-term policy, but for independent central banks. He preferred a growth standard automatic money on the ground that, although this rule was not perfect, "the best is the enemy of the good." In any case, it is wrong to say that the independence of the ECB is based on the monetarist theory. It is just as false as liberal monetary policy is conducted as if the currency could never have significant real effects. Friedmanienne lesson teaches us exactly the opposite, namely that the disastrous effects of bad monetary policy may be without limit.

Friedman taught us to fight inflation by monetary rigor and through the creation of currency deflation. He also taught us, either way, the importance of expectations and the usefulness of the indexing of all contracts to reduce the economic and social costs of anti-inflation policies as well as the close link that exists between monetary policy and Exchange. We learned to meditate lessons from monetary history and much relativising the notion of neutrality of the currency. He taught us to constantly question our ability to finely adjust the conditions. He taught us how the absolute independence of the central banks can have a perverse effect. What a pity that monetary policy sorcerer's apprentices who learned from him to fight against inflation have not read it to the end! They have learned also that if the money can not only sustainably create prosperity, it can only destroy many and for a long time when it is poorly managed.

Fear that sorcerer's apprentices do duplicate us a day or the other the blow of the Fed in the early 1930s.