Zeev's Turnips Patch-No Politics (ZEEV)

[market_watcher]

Didn't Milton Friedman, the father of monetarism, disavow the correlation between liquidity and economic activity recently. Perhaps a critical analysis of the monetarist doctrine would be necessary in order to conclude whether or not the FED can successfully revive the economy through liquidity operations at all. I don't know, but I think demand for money has to be there and can't necessarily be taken as a given. At a certain point, money becomes an 'inferior good'. Probably around the point at which FED governors are throwing it at businessmen who would really just like the FED to send over a customer or two, rather than give them a cheap loan.<g>

http://politics.guardian.co.uk/economics/comment/0,11268,982357,00.html

The economic quote of the month - and probably the decade - is that Milton Friedman now admits: 'The use of quantity of money as a target has not been a success.' He added: 'I'm not sure I would as of today push it as hard as I once did.' (FT, 7 June 2003).