Money Mischief

MONEY MISCHIEF: EPISODES IN MONETARY HISTORY describes the problem of inflation and various government efforts to control it. This is standard fare from Milton Friedman, who has been writing about monetary economics for decades. Large portions of the material in this volume, in fact, are revised from his other publications.

This is a somewhat awkward book, in that several of the chapters were written for a general audience while others appear to have been written for a specialized audience of economic historians. Friedman always writes clearly, so all the material is comprehensible, but some of the chapters are slow going because of the density of statistical material and historical detail.

The theoretical treatment of the problem of inflation alone, given in chapters 2 and 10, makes this volume worth reading. Friedman is clear and succinct in describing the problem of inflation and in making it clear that “a rise in the cost of living” is not the harm that comes from inflation, as is commonly believed. Other chapters discuss episodes in the history of monetary policy. Chapters 3 and 4, which discuss the Coinage Act of 1873, make it clear that some segments of society benefit from inflation and illustrate one attempt to achieve inflation through the political process. Chapter 5 describes the politics of inflation that affected the election of 1896. Silver purchases by the United States, Friedman argues in chapter 7, probably helped the Communist Party to gain control of China.

Friedman notes that only recently have all of the major countries of the world turned to fiat currencies, or money that is not convertible into some commodity, such as gold. This book centers on discussions of how governments of the United States and other countries have mismanaged their money supplies even when under the controls of convertibility. Friedman sees danger in the fact that governments are now under no restraints in their issuance of currency. He offers policy prescriptions for this problem and explains why there is less risk of inflation now than in other periods in which countries relied on fiat currency.