US Senators

Although he resisted formal Washington entanglements, Friedman was a highly political economist. Prior to the Nixon Presidency, his political influence was primarily exerted through informal channels. For example, in late January or early February 1951, he and six other Chicago economists issued a statement on ‘The Failure of the Present Monetary Policy’ (Friedman et al. 1951). The statement was sent to Senator Paul Douglas (1951, 1479, 1470) who read it to the Senate Congressional Record (22 February 1951). Douglas suggested that ‘Next to the questions of foreign policy and defense, the threat of inflation is perhaps the most serious one which we face.’ Douglas noted that the Fed was obliged to adopt an expansionary monetary policy to accommodate the Treasury’s desire to keep interest rates low so as to keep at a minimum the cost of government borrowings. Douglas suggested that the Fed should restrain the rate of growth of the money supply. On 2 March 1951, the Fed and the Treasury reached an ‘accord’ (Tavlas 1977).