What would Milton Friedman have Thought of Market Monetarism?

Abstract This chapter discusses how Friedman would have evaluated market monetarism if he had not died in 2006. Because market monetarism arose in response to perceived failures in the standard view of the Great Recession, emphasis is placed on how he would have interpreted that event. Much of the evidence that has been used to argue that Friedman would have been hostile to market monetarism is based on the response of other monetarists of Friedman’s generation to the events of 2008–09. In contrast, Friedman’s own writings on issues such as the Great Depression, the Japanese deflation, and Alan Greenspan’s low interest-rate policy during the housing boom, suggest that he looked at events from a strikingly market monetarist perspective. The market monetarists were the only significant group that blamed the 2008 recession on tight money and there is strong evidence that Friedman would have held the same view.