Parts Catalog Accessories Catalog How To Articles Tech Forums
Call Pelican Parts at 888-280-7799
Shopping Cart Cart | Project List | Order Status | Help



Go Back   PeachParts Mercedes-Benz Forum > General Discussions > Off-Topic Discussion

Reply
 
LinkBack Thread Tools Display Modes
  #1  
Old 02-04-2006, 11:42 AM
Botnst's Avatar
Banned
 
Join Date: Jun 2003
Location: There castle.
Posts: 44,601
St Milton O'Pines

Interview of Milton Friedman.
Bot

-------------

Free Markets and the End of History


Milton Friedman, 93, was awarded the Nobel Prize for Economics in 1976. His monetarist and laissez-faire ideas have been profoundly influential in the past several decades with leading political figures from Margaret Thatcher to Ronald Reagan. In late November, NPQ editor Nathan Gardels spoke with Friedman at his hilltop San Francisco apartment with panoramic views across the San Francisco Bay to the Golden Gate Bridge.

NPQ | You’ve seen a lot in your long life and thought about the big issues. What is on your mind these days?

Milton Friedman | The big issue is whether the United States will succeed in its venture of reshaping the Middle East. It is not clear to me that using military force is the way to do it. We should not have gone into Iraq. But we have. At the moment, the most pressing issue, therefore, is to make sure that effort is completed in a satisfactory way.

There is no doubt that America’s stature in the world—in large part due to the attraction and promotion of our liberal freedoms—has been eroded as a result of Iraq. However, if Iraq emerges in the end as a self-governing country that is not a threat to anybody, that will have a favorable effect on the Middle East in general. The end result then would be to increase the prestige of the US. But that is not the case now. The effect so far has been the other way.

NPQ | The so-called “old Europe” of France, Germany and Italy has been stagnating with high levels of unemployment. Germany—one of the last bastions of the Cold War Keynesian welfare state—now has a conservative leader, Angela Merkel.

What should be done to get Germany, and by extension old Europe, back on track?

Friedman | They all ought to imitate Margaret Thatcher and Ronald Reagan; free markets in short.

Germany’s problem, in part, is that it went into the euro at the wrong exchange rate that overvalued the deutsche mark. So you have a situation in the eurozone where Ireland has inflation and rapid expansion while Germany and France have stalled and had the difficulties of adjusting.

The euro is going to be a big source of problems, not a source of help. The euro has no precedent. To the best of my knowledge, there has never been a monetary union, putting out a fiat currency, composed of independent states.

There have been unions based on gold or silver, but not on fiat money—money tempted to inflate—put out by politically independent entities.

At the moment, of course, Germany cannot get out of the euro. What it has to do, therefore, is make the economy more flexible—to eliminate the restrictions on prices, on wages and on employment; in short, the regulations that keep 10 percent of the German workforce unemployed. This is far more urgent than it would otherwise be if Germany were not in the euro.

This set of policies would open up the German potential. After all, Germany has a very able and productive workforce. It has high-quality products that are valued all over the world. It has every opportunity to be a productive, growing state. It just has to give its entrepreneurs a chance. It has to let them make money, hire and fire, and act like entrepreneurs.

Instead, what you have as a result of past policies is that German entrepreneurs go outside of Germany for many of their activities. They are investing abroad instead of at home because there isn’t the openness, fluidity and opportunity they find outside their borders.

NPQ | British Prime Minister Tony Blair argues there is a “third way”—for example, flexible labor markets without hire-and-fire American-style. This, he argues, is more suitable to the “European social model” with its enduring concern with social justice. Is there an in-between way, or must it be all or nothing?

Friedman | I don’t think there is a third way. But it is true that a competitive market is not the whole of society. A great deal depends on the qualities of the population and the nation in how they organize the non-market aspects of society.

NPQ | Perhaps the Scandinavian countries are a model to look at. They are high-tax but also high-employment societies. And they have freed up their labor markets much more than in Italy, France or Germany.

Friedman | Though it is not as true now as it used to be with the influx of immigration, the Scandinavian countries have a very small, homogeneous population. That enables them to get away with a good deal they couldn’t otherwise get away with.

What works for Sweden wouldn’t work for France or Germany or Italy. In a small state, you can reach outside for many of your activities. In a homogeneous culture, they are willing to pay higher taxes in order to achieve commonly held goals. But “common goals” are much harder to come by in larger, more heterogeneous populations.

The great virtue of a free market is that it enables people who hate each other, or who are from vastly different religious or ethnic backgrounds, to cooperate economically. Government intervention can’t do that. Politics exacerbates and magnifies differences.

NPQ | The inflation rate in America as well as globally remains historically low, even as oil prices skyrocket. Why?

Friedman | Inflation is a monetary phenomenon. It is made by or stopped by the central bank. There has been no similar period in history like the last 15 years in which you’ve had little fluctuation in the price level. No matter what else happens, this will maintain as long as the US Federal Reserve maintains strict monetary policy and control of the money supply.

The same thing is true in Europe. The ECB (European Central Bank) has held down the rate of monetary growth. So there have been stable prices. The pressures in Europe, however, will be much stronger than in the US. The main pressure is to print money and be more expansive in order to promote employment.

What the ECB does really depends on whether Germany and France and Italy will back it. Italy may well be the main problem. It has benefited most from the euro by having been able to get the euro interest rate instead of what otherwise would have been its own. That would be much higher because Italy has been accumulating so much debt. In the past, Italy has inflated away its debt. The virtue of the euro is that Italy can’t do it alone. A tight ECB policy wouldn’t permit that to happen again.

In this sense, the euro is good for Europe. But only if there is flexibility all around. The problem is that, in a world of floating exchange rates, as Italy was before the euro, if one country is subjected to a shock which requires it to cut wages, it cannot do so with a modern kind of control and regulation system. It is much easier to do it by letting the exchange rate change. Only one price has to change, instead of many.

But now, in the euro, that option is taken away. The only alternative if a state has to adjust to a shock is to let internal prices vary. It has to let wages go down, if necessary. It has to let internal interest rates go up, if necessary.

NPQ | The US Treasury debt is held mainly by China, Japan and South Korea. Is the huge foreign balance of payments deficit a problem for the US and world economy?

Friedman | I don’t think so. It may well be a statistical mirage. If you look at the balance sheet, the US is heavily in debt. If you look at the income account—the amount of interest the US pays abroad—it is almost exactly equal to the amount of interest that it receives from abroad. American assets held abroad are earning a higher rate of return than foreign assets held here.

That is understandable because what is most attractive about the US to people and countries with wealth is that it can provide security, insurance really, against political instability. Nobody is afraid that the money they place in the US is at risk of expropriation or of in some other way being taken away. For this safety, the wealth holders of the world are willing to accept a lower rate of return. US assets abroad, in contrast, are riskier and thus yield a higher rate of return.

This explains why there is a rough balance in real terms. It is not clear there really is a debt. It looks like the imbalance concerns are misleading. It doesn’t worry me a bit that China and Japan hold so much US debt. In a way, it seems foolish for them to do it because they get lower returns than they might elsewhere. But that is their business.

More at http://www.digitalnpq.org/archive/2006_winter/friedman.html

Reply With Quote
  #2  
Old 02-05-2006, 01:56 PM
*
 
Join Date: Nov 2003
Location: Tiki Island Texas
Posts: 1,049
Quote:
Originally Posted by Botnst
Interview of Milton Friedman.
Bot


This explains why there is a rough balance in real terms. It is not clear there really is a debt. It looks like the imbalance concerns are misleading. It doesn’t worry me a bit that China and Japan hold so much US debt. In a way, it seems foolish for them to do it because they get lower returns than they might elsewhere. But that is their business.
Really thought provoking stuff, but shows me more than anything how inflexible academics are. This guy was once my hero, but now I see that von Hayek's ideas are only the other side of a circle that is always in play in a large super cycle. Control will always lead to a sort of collapse that is then followed by a free market that then brings on a collapse in society that then brings back controls. The cycles run into three generations or about 120 years that no single generation sees the bulk of. We're now entering into the second era of our own experiment while Russia and China are in the early middle part of their first era.
If these Chinese are just warm fuzzy softies that want to uplift all of mankind then I guess we should just feel all good that they're content to buy our bonds and finance that extra bit of government that makes conducting a war without seeming to make our own population sacrifice for it.
Milt's talking about money and business in his cold accounting sort of way without considering the real luck we got from the micro chip, telecom technology that came on just as his deregulations kicked in. It's not been as pretty in So. America that is quickly shifting back to the left or in Russia where a super elite class has popped up overnight. The great surge down there is coming from China's demand for raw materials, but it's only enriching the investors like us and not the workers that are already getting restless.
The big players are buying our bonds, and driving the Fed nuts, which holds down long term interest rates, while the masses and the government go more and more into hock. China and Russia keep backing issues that will cost us capital and are only using us to develop their own economies. Ten years from now we will be more of a threat than an asset. When they cash in those bonds we'll find out how Milty's no real debt equation works out.

__________________
89 300E
79 240D
72 Westy
63 Bug sunroof
85 Jeep CJ7
86 Chevy 6.2l diesel PU

"The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane."
Marcus Aurelius
Reply With Quote
Reply

Bookmarks

Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is On
Trackbacks are On
Pingbacks are On
Refbacks are On




All times are GMT -4. The time now is 08:01 AM.


Powered by vBulletin® Version 3.8.7
Copyright ©2000 - 2024, vBulletin Solutions, Inc.
Search Engine Optimization by vBSEO 3.6.0
Copyright 2024 Pelican Parts, LLC - Posts may be archived for display on the Peach Parts or Pelican Parts Website -    DMCA Registered Agent Contact Page