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 seemingly never got the joke.
Those on the “free market” side of the economist aisle still cling to the surely comical notion that they can and should plan money. They call themselves “monetarists,” and they claim that non-inflationary growth will be the reward if central banks stick to their pre-set money growth targets. Naaah. No house, street, town, city, state, or country ever needs to worry about how much or how little money is circulating.
That’s because production itself is the 100% certain signal that there’s sufficient money. It’s always where production is, and as though an “invisible hand” placed it there. The sole purpose of production is getting, and with the latter in mind, there are always, always, always exchange media facilitating the movement of products for products.
No central bank or any central authority could ever hope to plan the “supply” of exchange media necessary to move products for products. To presume to plan so-called “money supply,” central banks would have to grasp the infinite decisions taking place among billions of men, machines and thinking machines ever millisecond of every day on the path to production. Lots of luck there. Monetarism recalls the Five Year Plans of the old Soviet Union.
Not so says Jon Hartley, a Stanford economist known to caucus with members of the right. Even though Milton Friedman admitted in 2003 that monetarism was bogus, and even though he was more forthright about how bogus it always was in private, Hartley is one of a growing cohort of PhDs trying to make fetch happen (look it up) as it were, and revive the notion that economists know the money needs of the United States.
Better yet, the seeming optimist in Hartley writes with excitement that newly crowned Fed Chair Kevin Warsh shares his monetarist views. It’s hard not to chuckle, if only because others on the right claim Warsh isn’t a monetarist, but shares their views.
The good news is that it doesn’t matter. While Hartley writes at Civitas that Warsh will revive Friedman’s monetarism given his recognition that “you cannot ignore the sheer volume of money sloshing through the economy if you want to maintain long-term price stability,” reality will intrude. Prices are the effect of infinite actions and decisions taking place every millisecond all over the world. Warsh can’t overwhelm this truth from the Marriner Eccles Building.
As for all this money allegedly sloshing around, one wonders if Hartley or Warsh wonder 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 its extra free time did it place “supply” in Caracas, Pyongyang and Teheran? Once again, naaah.
There’s production and nothing else. Money is where production is. The Fed can’t alter this truth. It similarly can’t alter the truth that production dictates how much or how little money circulates.
Precisely because production can’t be planned from the Commanding Heights, neither can the money that has no purpose without production. Economists have God laughing.