No, he didn’t say that. He said if you have a lot of money in China, you might want to have a little in the risk-free US (emphasis mine). They have other choices, but they like the US for various reasons.
I think the confusion comes from Rose’s question about if this would be a security risk if they were to sell their bonds. Friedman responds “To who?” The point is that to be a seller, there must be a buyer, so the balance is the same. It doesn’t matter if it is China or someone else.
FWIW, China has been a net seller of US bonds for a decade or so and their holdings are down by nearly half over that time. If we needed China to buy our bonds we’d be in a world of hurt. By far, most US bonds are purchased domestically.
Yes you said that. Friedman definitely did not say that.
It is the case. Hamilton’s projection of economic, military, and political power. Great Britain being Hamilton’s case study. Borrowing projects the power. Borrowing underpins the economic system. Borrowing unpins the military system.
Did I miss anything?
Now it crashes because of TI.
We are wasting four years.
We need to up corporate taxes so that there are greater investments in American manufacturing, R&D, and the growth of middle class wealth.
I think you have repeated this a few times, but can you point to where Friedman has ever suggested that the US could “print” infinity? Most of his life seems to have been around responsible growth of the money supply and that inflation is always a by-product of gov’t monetary policy.
I agree he isn’t really concerned on trade deficits and probably not so much on fiscal deficit but he was never in favor of mass spending to create budget deficits. Only that the true amount of tax is how much you spend regardless if it is borrowed or collected directly from taxes. So how ever you controlled spending mattered.
Gah! I haven’t spent this much time taking Friedman apart, since 1981.
Yes, in one of his screeds, he throws out one line about how printing dollars would cause inflation. But what is the difference between a printed dollar, and a printed Treasury bond? They are both claims on the government.
Remember how the Fed was showering the banks with printed dollars, and the banks would then deposit the dollars with the Fed, and collect interest on them? iirc, the term was “sanitized”, because the process prevented the printed dollars falling into the hands of Proles, who would spend them, and create inflation. That is what the US is doing with trade: shower the counterparties with dollars, then borrowing the dollars back, in exchange for bonds. If there were no US bonds for the counterparties to buy, the dollars would rapidly lose value, because who wants more of the things? That’s about what he said to Charlie Rose: dollars sold to anyone else would be at a discount.
But Friedman simply ignores these obvious observations on the link between trade and fiscal deficits. After all, he’s an “authority”, he won a “Nobel Prize”. So everyone is supposed to fall in line with what he preaches.
He doesn’t just throw out a line about it he spent the bulk of his professional career on that topic. So missing that, how do you know he never links trade deficits to fiscal deficits? All he said was that the trade deficit didn’t really matter, at least in your video.
There is also a world of difference between printing dollars and printing treasury notes… One floods the market with cash and the other sucks cash out of the market unless it is the FED buying the treasury notes.
Yes, Milton Friedman linked trade deficits to budget deficits, particularly in the context of the “twin deficits” hypothesis. He argued that large government budget deficits could contribute to trade deficits by increasing domestic demand, which boosts imports, and by influencing exchange rates through higher interest rates, attracting foreign capital and appreciating the currency. This makes exports less competitive, widening the trade deficit. Friedman discussed this in his writings and interviews, notably in the 1980s, when U.S. budget and trade deficits grew significantly. However, he also cautioned that the relationship isn’t always direct, as other factors like private investment, savings rates, and global economic conditions play roles. For a deeper dive, his articles in Newsweek from the 1980s or his book Free to Choose touch on related fiscal and trade dynamics.*
Yes, I know. I read his columns in Newsweek, which I subscribed to from the late 60s, into the early 90s. And I read “Free To Choose”. That book left me with the impression that he thought dollars were worthless, and the US was putting one over on it’s trading partners, by persuading them to accept dollars for their goods. I was at a used book sale a few weeks ago, and saw a copy of that book. Didn’t bother with it tho. I can read the whole thing on Hoopla, if I want to, but I don’t feel like wading through it again.
And if the US decided to flood the market with Treasuries? Repeal all taxes, and finance the government with $7T/year in Treasuries. Would the bid on the bonds fall, due to the size of supply?
I was only pointing out that you seem to reference Friedman often but seem to misrepresent him in almost the complete opposite of what he has ever proposed when it comes to printing money. You probably can make your point better than without misrepresenting him.
iirc, my point is that, while he may pay lip service to unbridled dollar printing being inflationary, he is fine with printing bonds, he even says paying interest on bonds is the least destructive thing the government can do. I contend there really isn’t any difference between printing cash, and printing bonds, because they are both a claim against the government. Print too many of either, and the value the market places on either will fall.
Issuing bonds would be less inflationary than printing money because of the time delay. New money enters the economy immediately while bonds are IOUs paid back over time. The bond interest payments are spread out over, say, 10 years and this gives GDP time to grow. In addition, the initial bond purchase removes money from your pocket/bank account for the duration.
iirc, That is about what the Fed was doing when it was printing like mad a few years ago: handing the money to the banks, then paying interest to the banks for depositing that money with the Fed. So the printed cash fluffs up the bank’s balance sheet, but the cash isn’t allowed to get to the Proles, who would spend it. Hence, rampant printing, but no inflation.
