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Milton and (Charlie) Rose

Milton Friedman was the guest on Monday night’s The Charlie Rose Show.

Unfortunately, a free link to the show — or even its transcript — is unavailable.  But I don’t regret the $9.95 that I paid for the transcript to be e-mailed to me.  Friedman remains brilliant and important.

Here, for example, is Friedman responding to the oft-expressed concern that foreigners holding dollars and dollar-denominated assets is dangerous for America because foreigners might ‘dump’ these assets.

    MILTON FRIEDMAN:  Why – who — how would they dump it?

                CHARLIE ROSE:  They would sell it back.

                MILTON FRIEDMAN:  Sell what?

                CHARLIE ROSE:  The interest on the debt that they have.  The dollars they have.

                MILTON FRIEDMAN:  To whom?  To whom would they sell it?

                CHARLIE ROSE:  Your point is that there is no buyer.

                MILTON FRIEDMAN:  Well, there are buyers, of course there is always a buyer.  At what price?

                CHARLIE ROSE:  But wouldn`t that be destabilizing?

                MILTON FRIEDMAN:  Who would lose money?  Who would lose money on that kind …

                CHARLIE ROSE:  Wouldn`t that be destabilizing?  Wouldn`t that suggest a lack of confidence in the American economy?

                MILTON FRIEDMAN:  Yes, it might.  But the people who would lose by it would be the foreigners who held that and who dumped those dollars.

                CHARLIE ROSE:  Well, then are they in a frozen position then, so that they – they have no flexibility?

                MILTON FRIEDMAN:  They are not in a frozen position.  They are in a position they want to be in, because that`s why they are holding these assets.  Because they are afraid of risk, of political risk.

                CHARLIE ROSE:  What happens if they would allow …

                MILTON FRIEDMAN:  And in general, let`s suppose foreigners start dumping their assets here.  They would dump them at distressed prices.  They would have no …

                CHARLIE ROSE:  Once it started (INAUDIBLE) would begin.

                MILTON FRIEDMAN:  And who would buy them?  The people at home, here, the people in the United States, who had confidence in the United States.  So what you would have would be that the assets would go from weak hands to strong hands.  It isn`t going to happen, because there is no reason for foreigners to dump the dollars.

                CHARLIE ROSE:  But nothing is certain, is it?  I mean, certainly in economics …

                MILTON FRIEDMAN:  Of course not.  Nothing is absolutely certain.  But you can be pretty damn sure of what is likely to happen and what isn`t.

                CHARLIE ROSE:  What might — but argue the other side.  What might cause someone to say we`re holding too many dollars and – and we don`t think it`s healthy.

                MILTON FRIEDMAN:  There is only one thing that would cause them to do that, and that`s if we engage in inflation.

(Hat tip to David Boaz.).