Friedman believed that if the money supply was to be centrally controlled (as by the Federal Reserve) that the preferable way to do it would be with a mechanical system that would keep the quantity of money increasing at a steady rate. However, instead of government involvement at all, he was open to a “real,” non-government, gold standard where money is produced by the private market:
“A real gold standard is thoroughly consistent with [classical] liberal principles and I, for one, am entirely in favor of measures promoting its development.” He did however add this caveat, “Let me emphasize that this note is not a plea for a return to a gold standard…. I regard a return to a gold standard as neither desirable nor feasible—with the one exception that it might become feasible if the doomsday predictions of hyperinflation under our present system should prove correct.”
He said the reason that it was not feasible was because “there is essentially no government in the world that is willing to surrender control over its domestic monetary policy.” However, it could be done if “you could re-establish a world in which government’s budget accounted for 10 percent of the national income, in which laissez-faire reigned, in which governments did not interfere with economic activities and in which full employment policies had been relegated to the dustbin…
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