Monetarism

The monetarism is a kind of doctrine economic that is responsible for studying the effects that different changes in supply currency on economic variables such as employment , prices or production . You have the idea that the money supply will increase, producing an increase in production in the short term and inflation in the long term. The foundation of monetarism is based on the quantity theory of money. This theory implies above all an accounting identity; this means that it has to be true. It postulates that the money supply multiplied by the rate at which money circulates is equal to the nominal expenses of the quantity of goods and services that manage to be sold multiplied by the average price that has been paid. It is considered in monetarism that the speed of production is stable and that the variations that occur in income will be reflected in the amount of goods that are sold and in the average price paid for them.

Characteristics of monetarism

For monetarism, the State must remain outside of business. From the monetarists’ point of view, it should only be in charge of controlling the amounts of money that circulate and that the economy requires.

They think that consumption is not influenced by income in the short term, but by income in the long term.

They consider the private sector to be the most stable .

They think that the State is solely responsible for the economic crises that countries face.

They agree and support free trade and avoid state intervention.

History of monetarism

The monetarism as a doctrine arose after the Second War World , and came to doubt the trend of the early Keynesians who put much emphasis on tax policy in which it gave during the years 1935-1960. Monetary theory is the part of the economy that is responsible for analyzing and studying the behavior of money and its relationship with the economic system. For the classics of the time, this theory explained the correct way to determine the value of money. During Roman times, these thoughts were already known and were later used to give an explanation about how the death had been brought about.inflation during the sixteenth century caused by the large amount of gold that came from America and gradually reached the markets of Europe . The origin of current monetarism can be found in the proposal made by John Stuart Mill regarding the general dependence of prices on the amount of money that is in circulation. This proposal suggests that the general level of prices is related to the quantity of money multiplied by its speed of circulation.

Milton Friedman and monetarism

Milton Friedman was a man who believed completely in free markets and distrusted the state. An important economist of Hungarian origin, he was a great defender of the free market and an exponent of neoclassical monetarism within the Chicago School of Economics . He was a member of the Mont Pelerin Society , a society that had beliefs in certain basic principles in favor of freedom of the individual, the market economy, private property, and limited government in some respects. Friedman was harshly criticized by some of his colleagues within this society. Some aspects that were criticized against him were his beliefs in aspects such as negative income tax, different flexible exchange rates , antitrust laws , opposition to gold and his criticism of the privatization of the different routes and the ocean. .

Friedman was also a man who fought for the freedom of choice. For him, private property is the basis of all kinds of exchange , of justice and progress within society. He defended capitalist laissez faire and also believed in the invisible hand of Adam Smith , in the sense that all individual actions that were presented were in charge of maximizing both individual well-being and that of society . He was a great critic of Marx and Marxist doctrines regarding exploitation , he was also against thoughts against capitalism. He had a long struggle defending free trade , free immigration policy, and globalization . He looked for a way to eliminate the barriers that caused a lower income of goods and services in some countries.

Friedman made important contributions to macroeconomics , microeconomics , economic history, and statistics . In 1976, he was also awarded a Nobel Prize in Economics for all the achievements he achieved in the field of consumer analysis.