A Professor of Economics at Harvard University, Greg Mankiw, has blogged a letter he received from Milton Friedman, the world famous Nobel Memorial Prize in Economics winner.
Mankiwi, himself no economic slouch having served as chairman of the presidential council of economic advisors, describes getting the e-mail as “For a classically liberal, applied macroeconomist like me, getting an email from Milton Friedman makes one appreciate what Moses must have felt when God tapped him on the shoulder to deliver wisdom to the masses.”
Anyway in the e-mail Friedman states:
My aphorism, “Inflation is always and everywhere a monetary phenomenon,” was converted from an object of derision to a near truism. This experience was of course strongly reinforced by the leadership shown by Alan Greenspan in the United States, but also I believe by the leadership shown by Donald Brash in New Zealand.
New Zealand was the first country to introduce inflation targeting and it arose out of the contract which Donald Brash arranged with the central government under which he committed himself to keeping inflation between I believe it was one and 3 percent. The arrangement was that if he did not do that he could and presumably would be fired. Volcker and Greenspan in the United States brought down inflation without stating any numerical targets. Brash introduced the term “inflation targeting” and succeeded in keeping his position by achieving his targets. The example was followed as you know by Australia, Britain and many other countries.
Because Brash is now a politician, Labourites have been very revisionist with Brash’s career as Reserve Bank Governor. It’s a nice reminder that Dr Brash was literally a world leader in monetary policy and central bank management.
Hat Tip: Tyler Cowen