How Milton Friedman TRANSFORMED GOVERNMENT ECONOMIC POLICY

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Click the Link Below to Get the VIP Indicators Discount: • https://tinyurl.com/finpassvipindicators • Summary: • In this video I discuss how Milton Friedman changed how the US government and the public thinks about different topics such as inflation and monetary policy. Milton Friedman is responsible for promoting the economic theory of monetarism, and his core idea was that the government should use its tools to control the money supply if it wants to control different aspects of the economy. Milton Friedman's ideas have become popular with public policy makers and his ideas have influenced federal reserve policy and decisions regarding the US economy. • Timestamps: • 0:00 Intro • 0:15 Milton Friedman Life • 0:35 Chicago School of Economics • 0:57 Inflation • 1:30 Money Supply • 1:50 Monetarism • 2:09 Quantity Theory of Money • 2:22 Money in Circulation • 2:47 Natural Rate of Unemployment • 3:12 1970s High Inflation • 3:30 Central Banks • 3:58 Outro • Full Video Transcript (Generated by Youtube Subtitles) • Welcome back to Finance Pass, where we explore the • principles of successful investing. • Today we will be exploring Milton Friedman's • groundbreaking ideas about inflation. • Milton Friedman was an American economist who • received the Nobel Prize in Economic Sciences in • 1976. • He is best known for his work in the fields of • consumption analysis, monetary history and theory, • and for his advocacy of free-market policies. • But today we will be talking about his theory of • inflation. • Friedman joined the University of Chicago in 1946 • and quickly became one of the leading figures of the • Chicago School of Economics. • The Chicago School is known for its strong belief in • free markets and limited government intervention. • Friedman developed several key economic theories • that challenged the dominant Keynesian view of the • time. • So, what is inflation? • In simple terms, inflation is the rate at which the • general level of prices for goods and services rises, • eroding purchasing power. • But what causes inflation? • He Stated 'Inflation is always and everywhere • a monetary phenomenon.' • What he meant by this is that inflation occurs when • there is too much money chasing too few goods. • According to Friedman, the primary cause of • inflation is an increase in the money supply that • outpaces economic growth. • Friedman argued that when the central bank— like the • Federal Reserve in the United States— increases the • money supply too rapidly, it leads to higher prices. • This is because more money in the economy increases • demand for goods and services, but if the supply of • those goods and services doesn't keep up, prices go • up. • This idea is a cornerstone of what's known as' • Monetarism', a school of thought that emphasizes the • role of governments in controlling the amount of • money in circulation. • Friedman and other monetarists believe that • controlling the money supply is the most effective • way to regulate economic activity and keep inflation • in check. • Friedman also created the Quantity Theory of Money. • This theory states that there is a direct • relationship between the amount of money in an • economy and the level of prices of goods and • services sold. • Therefore, Inflation is directly related to the • amount of money circulating in the economy. • According to Friedman, the primary cause of • inflation was an excessive growth in the money • supply. • For the money supply to grow without causing • inflation, it must be in line with the growth of • goods and services in the economy. • Friedman also introduced the concept of a natural • rate of unemployment,' which is the level of • unemployment expected in an economy that is • operating at its full potential. • He argued that attempts to reduce unemployment below • this natural rate using expansionary monetary policy • would only lead to higher inflation. • But how does this apply to real-world policy? • In the 1970s, many countries, including the United • States, experienced high inflation. • Friedman's theories suggested that this was due to • excessive growth in the money supply • Central banks responded by tightening monetary • policy, which eventually brought inflation down, • validating Friedman's views. • Today, central banks around the world use tools like • interest rates and reserve requirements to control • the money supply and keep inflation in check. • Friedman's influence is still very much present in • these policies. • The federal reserve has been massively influenced by • Milton Friedman's ideas about using fiscal policy to • control different aspects of the economy through • fiscal tools such as interest rate hikes and rate • cuts. • If you found this video helpful, you can check out • similar videos about other topics in the world of • finance by subscribing to this channel. • And feel free to leave a comment on other topics you • want us to cover. • Thanks for watching! • Finance Pass is a channel that engages viewers with exciting stories about a wide variety of people and concepts in the topics of economics, finance, government, and politics.

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