It wasn’t a formal debate. We were just talking. No, Friedman believed in the Fed. It was strange, but he thought the Fed was necessary.
I have always advocated at minimum a return to “free banking” where individual banks can print their own money backed by gold. My real position is more radical: they should print money backed by whatever they want. The market will sort it out very quickly.
Yeah you’ve told me your radical, position a few times. I think it’s a very interesting idea. But I didn’t know that about Friedman, Thank you for the information.
Based on what i have heard in his lectures, he considered a fiat money to be a mistake, but that now that the money was disconnected from gold, it would be impossible to return to it.
The Red Eye guys make a good argument for fiat money. My personal opinion is that our nation’s people need a good education on what money is.
That is, money is the numerical representation of our labor and commodities that is easier and effient for the labor and commodities we need. By allowing the Fed to print money without a tangible backing, it allows the fed to devalue our labor and commodities that we have already exchanged for money. We saw that in the past few year with quantitative sleazing.
The major effect of fiat money is immediate spending of the money, and discourages saving, which prevents collective investment into new production and innovation that requires large amounts of money...more than the average individual can provide.
Bank promissory notes would stagnate the economy and develop into segregation of communities.
“I have always advocated at minimum a return to ‘free banking’ where individual banks can print their own money backed by gold. My real position is more radical: they should print money backed by whatever they want. The market will sort it out very quickly.”
Read James Grant’s book on banking, I believe it’s called Money of the Mind. Prior to 1913 banks printed their own currency (a boon to counterfeiters). The currencies of various banks were valued differently in the market and traded like foreign currencies.
Of course this was known as “bank money” or “credit money” during the gold standard era. Banks by their very nature engage in fractional reserves, there never was a gold dollar backing every bill that they printed.