I came across and article about the economic policy of Ben Bernanke (Fed). According to the article he is a fan of Milton Friedman and thinks he can counter deflation by unlimited money pressing. Now the thing I don't understand is the automatic assumption that world currencies are deflating just because stocks are going down.
Where does he get the impression that a currency is like a container that always holds the same value no matter what? As far as I know it is always a question of question and demand. If nobody wants it, the price goes down. Consequently it has less value, right?
This is exactly where Bernanke lost me, to my opinion it also does not match what Milton Friedman advocated. Namely: Friedman thought that the total amount of money increase in a system must be controlled and must be limited with a fixed percentage p/annum. I can dig that.
According to that same article Ben Bernanke said in 2002: "The American governement has a money-press that can make unlimited money for free".
Additionally he froze the interest rate until 2013 and consequently surrendered his main weapon to control inflation (which is a possible result of unlimited money pressing [Friedman]).
Milton Friedman warned us: Unlimited money can cause inflation in both long and short term.
Why did the Fed surrendered their most valuable weapon?
