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The central bank is not in charge of the economy. They are servant, not master. Unfortunately that 'Friedman rule' belief relies upon there being a fixed amou
by neilwilson 4y ago
The central bank is not in charge of the economy.
They are servant, not master.
Unfortunately that 'Friedman rule' belief relies upon there being a fixed amount of money and a one-to-one relationship between money and stuff. There isn't a fixed amount of money. There isn't a one-to-one relationship between money and stuff. Money grows and shrinks depending upon the transaction requirements of the real economy.
A Full Liquidity rule, on the other hand, allows the government sector to adjust its taxation and spending positions and reduce the level of taxation required in a full employment environment.
- boole1854 4y ago> Unfortunately that 'Friedman rule' belief relies upon there being a fixed amount of money and a one-to-one relationship between money and stuff. I'm not sure what you mean by this. The Friedman rule does not assume there is a fixed amount of money -- the rule itself recommends in some circumstances that the central bank should increase the supply of money.
- neilwilson 4y agoThe central bank is not in control of the quantity of money. Money is created dynamically by all entities in society as and when it is needed. That's what trade credit is all about, for example.