Ep. 276 Even Milton Friedman Slipped in His Defense of Trade Deficits
Bob uses the illustrious Milton Friedman to demonstrate a depressing tendency among economists to overreact in their zeal to defend trade deficits, where they end up arguing that it’s necessarily beneficial to live beyond one’s means. Although this could be true in certain cases, it’s not true in general. Bob then explains that the original mercantilists weren’t as dumb as modern economists claim.
Mentioned in the Episode and Other Links of Interest:
- Twitter thread with Friedman clip (and some of Bob’s response).
- Bob responding to a similar mistake by the WSJ editors.
- Bob Murphy Show episode on reparations and AI.
- Help support the Bob Murphy Show.
The audio production for this episode was provided by Podsworth Media.
About the author, Robert
Christian and economist, Chief Economist at infineo, and Senior Fellow with the Mises Institute.
Hi Bob,
One thing I think would be worth going into is pointing out that being the reserve currency is not just an immutable fact of the universe – it is directly impacted by how much we abuse that status by printing up money to buy real goods and services.
Good point! I bring this up with the MMT people occasionally.
I loved the hot dog example. And while the whole line of argument was true (it was not “free”) to spend $100 on 2 dogs even if the money was found), it seemed weird to leave out what seems like the lore important argument that by merely creating the additional $100, even if it is spent wisely purchasing goods at their market price, that you have still given the receivers of that $100 purchasing power to compete with your own that they otherwise would not have had. Even if foreigners “sit on” the additional currency for years, it represents purchasing power they can deploy in competition with one’s own at the time of their choosing. While not a contractual debt, it is analogous to being in debt in that one will be able to consume less in the future than one otherwise would have been able to had the additional $100 never been created.
Episode 49 plus the 49th prime.