Money Mischief_ Episodes in Monetary History - Milton Friedman [118]
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* Data on note issue from Yang (1985, p. 35), on wholesale price index from Huang (1948, p. 564). I am indebted to Liu Na for translating the titles and headings of the tables in Yang from Chinese to English.
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* Several examples of contemporary observations about the effect of declining prices on the economy were referred to earlier (Salter 1934, Young 1971, Rogers as cited by Young 1971). Another, somewhat later observation is contained in T'ang (1936). Referring to the period after the abandonment of the gold standard by Britain in 1931, he wrote: "Falling prices greatly aggravated conditions, as farmers and manufacturers found their income steadily decreasing, while such expenditures as interest on loans, taxes, etc., remained high, and rent, wages, etc., declined more slowly than prices. The conditions of workers in steady employment on fixed incomes improved through the fall in prices, but great numbers of wage-earners had been thrown out of employment by the crisis, more than cancelling the benefit to those who retained their positions. The economic situation steadily worsened" (p. 51).
With respect to conditions a few years later, T'ang wrote: "The effect of the slump upon industry in 1932/3 was registered by a great increase in unemployment....In 1934 conditions became still worse. The fall in prices had first affected manufacturers and land-owning farmers, while farm labourers, and such other workers who remained in employment, were aided by lower living costs. But wages both for farm and factory labour sank as economic conditions worsened, and suffering extended further and further" (p. 60).
Still another example of a contemporary observation, though published much later, is Young (1971, pp. 208–11, 220–23).
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* Such a low ratio was not reached in the United States until after the Civil War, by which time real income per capita in the United States was about ten times as large as estimated real income per capita in China in 1933. Such a low ratio was not reached in. France until 1952 (Saint Marc 1983, pp. 38–39)!
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† Some percentages for underdeveloped countries for 1988, based on IMF estimates, are 60 for India, 62 for Syria and Mexico, 65 for Chad, 68 for Zaire and Nepal, 74 for Yemen Arab Republic, 78 for Central African Republic.
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* The decline in the smaller total may be an overestimate because Rawski does not allow for a probable decline in the silver reserve held behind bank notes. But even making the maximum possible allowance for such a decline serves to produce only a negligible increase from 1931 to 1935 and leaves a decrease of 3 percent and 2 percent from 1932 to 1935.
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* For the United States and the United Kingdom, the price index is the deflator implicit in computing real national income; for Germany, Japan, and Brazil, it is consumer prices. For all the countries except Brazil, money is defined as the counterpart of the total designated M2 in the United States; for Brazil, money is defined as the counterpart of the total designated Ml in the United States, since that is the only total for which data were available through 1989. For the U.S. and the U.K., output is real national income; for the other countries, real gross national product. For the U.S. and the U.K., the data come from Friedman and Schwartz (1982, tables 4.8 and 4.9), extrapolated after 1975 by official data. For the other countries, the data come from various issues of International Financial Statistics, published annually by the International Monetary Fund, and, for Brazil, also from the 1989 annual report of the Central Bank of Brazil.
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* This is achieved by making the ratio of the vertical to the horizontal scale the same in all the charts.
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* There is much confusion about whether the Federal Reserve System is a branch of the government