More then half of this collection of essays is about the so-called 'Crime of 1873' - America's decision, following the issuance of fiat money (that is, money irredeemable in specie) during the Civil War, to peg the dollar not to both silver and gold, but to gold alone. This seemingly arcane and academic topic was a major political issue in the 1880s and 90s, climaxing with the nomination of the silver Democrat, William Jennings Bryan to the presidency of the United States in 1896.
As the Unites States, along with most other 19th century nations such as Germany and France, followed Great Britain in adopting the gold standard, the price of gold rose in terms of other resources, so prices went down. Therefore there was a severe deflation causing much unrest and discontent.
The cure to the deflation came not through political or monetary means, however, but because of an invention of a method to extract gold from low grade ore. This increased the supply of gold, lowered its prices. Hence stopping the deflation, and killing the presidential ambitions of William Jennings Bryan.
The rest of the book describes various issues, from FDR's decision to 'help silver' which helped Communism in China instead (by increasing the cost of silver, overvaluing the Chinese currency and thus hurting Chinese exports and undermining the Chinese economy), to the policy of pegging a currency to the dollar (not a good idea as it subjects the country to the whims of the world economy. The policy was a grave failure to Chile and a great success to Israel, due entirely to external changes in the value of the dollar).
The theme of the later parts of the book is undoubtedly inflation. Friedman demonstrates his claim that inflation is "always and everywhere a monetary phenomenon" (p.104). Inflation is caused by government increasing the money supply, although one time price increases may be caused by unfortunate outside events (like Arabs reduction of the exportation of oil in the early 1979s).
Although Friedman is well known as an economic right winger, there is nothing in this account that should be displeasing to anyone from the left - Friedman's case is against mismanagement, not for small or big governments. Nor is there any argument about whether government spending should go to the military, to welfare, or to any other cause. Although Friedman's book is filled with stories of the political economy, its moral is politically neutral. Indeed, Friedman clearly discusses how inflation is often used by governments because direct taxation is unpopular (p.205) - can you say "read my lips, no new taxes"?
Furthermore, the economic analysis of some reviewers in Amazon is shaky. Friedman writes "all these adjustments [the negative effects of inflation] are set in motion by changes in the rates of monetary growth and inflation. If monetary growth was high but steady... the economy would adjust to it. ... Such an inflation would do no great harm " (p.222).
Although Friedman does not like inflation, he actually makes a case for it, at least at a low single digit level. Since people are usually sellers of few things and purchasers of many, they are more aware of the increase in the price of the commodity they sell then they are of the increase of general prices, especially when those changes are low. People like to see their income go up, as they feel it is a just reward for their efforts (p. 70).
'Money Mischief' is an interesting, challenging book. Its chapters vary from the extremely technical and difficult, (notably chapter 4, a counter-factual exercise estimating the effect of continuing bimetallism after 1873), to 'pop economics' chapters which are no less enlightening and easier to read.
The book ends with a discussion of the new experiment started in the 1970s - currency which is entirely unredeemable by any kind of good. Earlier economists thought that this was impossible, and would necessarily lead to high inflation, but Friedman is optimistic - he believes that aware and well informed public and decision makers can pressure the government against unduly increasing the money supply. Thus, widespread understanding of economics is the real cure for inflation.
This book examines 10 different episodes in world history in which seemingly trivial policy choices towards money had profound, unexpected, and unforeseen consequences (usually very bad). They make enjoyable reading and are most educational.
The discussions are not all that technical and, to me, sparkle with wit and insight. This book can serve as a great introduction to how gold and silver money was abused, the effect that minting rights can have, how technology changes in mining precious metals caused a crisis of devaluation, what the heck bimetallism is and what the issues around it were (are), and most important, the risks of the kind of money we have (fiat money - because it is not tied explicitly to some kind of commodity and is therefore at the risk of somebody running the printing press too much). This is all great stuff. Enjoy!
There are several useful graphs and tables. Also, a reference list in the back can act as a bibliography for further reading.
In any nation at any point in modern history, inflation comes from only one source the national government, not by some physical event, war or deficit spending. He details how the cause of inflation is growing the money supply faster than the output of goods and services. In his fabulous review of money he chronicles the centuries of price stability that came to an end with the creation of paper money. This fiat money is not backed by a precious metal and it has spread becoming the only remaining currency in the world. He does not argue for the return to a precious metal standard as some have misrepresented.
He provides details in country after country of how governments hallucinate that the citizens will not blame the government. Inflation directly benefits the government at the expense of the citizens. In addition to the impact on your liquid assets, the government debt is paid back or refinanced with far less valuable inflated dollars. He shows how tax cuts only giving back the tax increases that come from bracket creep in an inflationary environment. Finally. People and the financial markets quickly learn that interest rates have to compensate for inflation plus a real above inflation.
In current times this means government ten year bond rates of six to eight percent or more. The last ten years was the most ideal time in a century to control inflation. However, inflation was still three to five percent per year. The only logical assumption is that in the next ten years inflation is more likely to be near five percent or more. The historical real return required on government bonds is viewed as about three percent hence the total yield of six to eight percent. Currently, it is slightly below the range. Home mortgages will tend to be a couple percent higher than the government bond. In the simplest terms, had the Federal Reserve controlled inflation to zero, mortgage rates would be half what they are today. Since Greenspan went into the job committed to zero inflation like no other Fed Chairman, there will be no realistic basis for trusting in any potential Federal Reserve policy to eliminate inflation. It would take many years of proof before bond markets would believe any such policy. Because of money mischief we are stuck with high interest rates for a very long time. Thanks to our Federal Government and no one else. The blame could not be more clear.
Many governments have fallen including democracies over the matter of inflation. As USA citizens learn about inflation, it follows that political views will change. One of Friedman's most valuable contributions is the mathematical proof and imperial evidence collection that a little inflation does not help reduce unemployment. It worsens employment. Specifically, while 3% inflation is a smaller crime against the people than 10% inflation, it is still a crime with no redeeming virtue. This is not a matter of theory or political philosophy. Thanks largely to Friedman, the proof is in and the public debate should draw to a close.
The crowning moment of the book is when he details the observations that fiat money as a global money system is only a few decades old and it remains to be seen if governments can be harnessed by citizens to stop inflation. Friedman causes us to appreciate that there is only one place to draw the line. That is at zero inflation. The wreckage of inflation is not just in the aggregate economy, the low income and the retired. The mismanagement of money in the case of the USA by the Federal Reserve eventually reeks havoc in the securities markets. While Friedman is the Federal Reserves most articulate and worthy critic, his goal is to strengthen the spine of the Federal Reserve by educating the public and the government. After reading this book you are likely to see the senators that rant that "only they care about the unemployed and the Federal Reserve must now and always pump up the money supply" as at best badly misinformed.
To label Friedman a conservative or a libertarian economist as some reviewers do is to suggest that you can dismiss the authors views as not mainstream and suspect. This convention has clearly crossed over from the liberal major market media of modern times. It is truly dastardly to degrade the standing of Milton Friedman. His great works should command everyone's study and one should allow your views to be challenged simply on the merits of Friedman's work. A Nobel Prize is not awarded as the result of some game. Friedman's contributions to the modern world are profound.