Milton Friedman’s Shower Scene Is Back
As the Fed fiddles with the monetary taps, expect scalding and freezing while markets overshoot.
Shower power.
Source: Bettmann
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When it comes to monetary policy, it never rains but it pours. That’s a broader meteorological adaptation of the famous metaphor that Milton Friedman, the father of monetarist economics, made between central bankers and the “fool in the shower.” We can all relate. You stand under the shower, and it’s still too cold, so you turn up the hot, and suddenly it’s scalding. Then you turn the hot tap down again, and the shower is freezing. For a hapless naked person adjusting the flow of hot water, substitute a central banker trying to get the flow of money supply just right, and you have the problem with monetary policy.