Quotation of the Day…

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… is from pages 15-16 of Milton Friedman’s 1967 “First Lecture” in a debate that he had with Robert Roosa, the proceedings of which are published under the title The Balance of Payments: Free versus Fixed Exchange Rates:

A system of floating exchange rates completely eliminates the balance-of-payments problem – just as in a free market there cannot be a surplus or a shortage in the sense of eager sellers unable to find buyers or eager buyers unable to find sellers. The price may fluctuate but there cannot be a deficit or a surplus threatening an exchange crisis. Floating exchange rates would put an end to the grave problems requiring repeated meetings of secretaries of the Treasury and governors of central banks to try to draw up sweeping reforms. It would put an end to the occasional crisis producing frantic scurrying of high governmental officials from capital to capital, midnight phone calls among the great central banks lining up emergency loans to support one or another currency.

DBx: I thank Phil Magness for reminding me of this piece by Friedman, which I’d first read as an NYU student in 1981 at the suggestion of Professor Fritz Machlup. Until Phil, at his Facebook page, quoted from this piece, I’d forgotten about it.