Quotes from “Monetary Policy: Theory and Practice”

By Milton Friedman (1982)

• Were it feasible for the Federal Reserve to adopt and achieve a target interest rate, it is inconceivable that the prime rate would ever have risen to over 20 percent. In principle, given sufficient knowledge about market behavior, it is possible to use money market instruments to achieve monetary aggregate targets. However, experience has demonstrated that monetary authorities are in practice unable to achieve in this way the degree of control over monetary aggregates that seems hypothetically possible. #
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• Short-term swings in monetary growth do no great harm if they are not only actually reversed but also widely expected to be reversed.#
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• The conduct of monetary policy does not require that the Federal Reserve System have any member banks. . . . The latter requires simply that the monetary authority have a monopoly on the printing press or its equivalent to control the total amount of high-powered or base money. Control over the base exerts about as much influence on nonmember commercial banks as on member banks, on thrift institutions as on commercial banks, and so on in unending circle.#
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