Money Mischief: Episodes in Monetary History

by Milton Friedman

"A lively, enlightening introduction to monetary history…from monetarism's most articulate apostle."— Kirkus Reviews "The Oliver Stone of economics" (Chicago Tribune), Nobel Prize laureate Milton Friedman makes clear once and for all that no one, from the local corner merchant to the Wall Street banker to the president of the United States, is immune from monetary economics. In Money Mischief, Friedman discusses the creation of value: from stones to feathers to gold. He outlines the central role of monetary theory and shows how it can act to ignite or deepen inflation. Through colorful historical episodes, he demonstrates the mischief that can result from a misunderstanding of monetary economics — how, for example, the work of two obscure Scottish chemists destroyed the presidential prospects of William Jennings Bryan and how Franklin D. Roosevelt's decision to appease a few senators from the American West helped communism triumph in China. And he explains, in plain English, what the present monetary system in the United States means for your paycheck and your savings as well as for the global economy.

Genres: Economics, History, Nonfiction, Finance, Business, Money, Audiobook

304 pages, Paperback

First published January 1, 1992

About the author

Milton Friedman was an American economist who became one of the most influential and controversial figures of the twentieth century, widely recognized for his profound contributions to monetary economics, consumption theory, and the defense of classical liberalism. A leading figure of the Chicago School of Economics, Friedman challenged the prevailing Keynesian consensus that dominated mid-century policy and instead placed monetary policy at the center of economic stability, arguing that changes in the money supply were the primary drivers of inflation and fluctuations in output. His groundbreaking permanent income hypothesis reshaped the study of consumer behavior by suggesting that individuals make spending decisions based on long-term expected income rather than current earnings, a theory that profoundly influenced both academic research and practical policymaking. Alongside Anna Schwartz, Friedman coauthored A Monetary History of the United States, 1867–1960, a monumental work that emphasized the role of Federal Reserve mismanagement in deepening the Great Depression, a thesis that redefined historical understanding of the period and helped establish monetarism as a major school of thought. His broader philosophy was articulated in works such as Capitalism and Freedom, where he argued that political and economic liberty are interdependent and advanced ideas like educational vouchers, voluntary military service, deregulation, floating exchange rates, and the negative income tax, each reflecting his conviction that society functions best when individuals are free to choose. Together with his wife Rose Friedman, he later brought these ideas to a global audience through the bestselling book and television series Free to Choose, which made complex economic principles accessible to millions and expanded his influence beyond academia. Awarded the Nobel Prize in Economic Sciences in 1976 for his achievements in consumption analysis, monetary history, and stabilization policy, Friedman became a prominent public intellectual, sought after by policymakers and leaders around the world. His ideas strongly influenced U.S. policy in the late twentieth century, particularly during the administration of Ronald Reagan, and found resonance in the economic reforms of Margaret Thatcher in the United Kingdom, both of whom embraced aspects of his prescriptions for free markets and limited government intervention. Friedman’s policy recommendations consistently opposed measures he regarded as distortions of market efficiency, including rent control, agricultural subsidies, and occupational licensing, while he proposed alternatives such as direct cash transfers through a negative income tax to replace complex welfare bureaucracies. His teaching career at the University of Chicago shaped generations of economists, many of whom extended his research and helped institutionalize the Chicago School as a major force in global economic thought, while his later role at the Hoover Institution at Stanford University provided him with a platform to continue his scholarship and public advocacy. Beyond technical economics, Friedman’s clarity of expression and ability to frame debates in terms of individual freedom versus state control made him one of the most recognizable intellectuals of his era, admired by supporters for his defense of personal liberty and market efficiency, and criticized by detractors who accused him of underestimating inequality, social costs, and the complexities of government responsibility. Despite the controversies, his impact on the development of modern economics was immense, reshaping debates about inflation, unemployment, fiscal policy, and the role of the central bank. His writings, lectures, and media appearances consistently reinforced his belief that competitive markets, voluntary exchange, and limited government intervention offer the most effective means of promoting prosperit

Reviews

[Jeff Isenor · Rating 5 out of 5]

Friedman is excellent at condescending to the level of people who don't have a PHD in economics. It gives a much clearer understanding of what money actually is. I will never look at money in the same way again.

[Josh Friedlander · Rating 3 out of 5]

It's easy to miss how influential Friedman is as an economist, second perhaps only to Keynes in the last century. Big chunks of this book are an abbreviation and simplification (although still pretty dense, make no mistake) of Friedman and Anna Schwartz's book A Monetary History of the United States, about which (then Fed chief) Ben Bernanke said

Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression, you're right. We did it. We're very sorry. But thanks to you, we won't do it again.

The book opens with the concept of money as neutral store of value, as instanced by the large stones used on the island of Yap, and quickly levels up to talk about how increases in the supply of money bring about inflation, Fischer's equation of exchange (MV = PY), and how to determine the desirable rate of inflation. He surveys the fiasco of the French Revolutionary assignat, how American support for the price of silver might have doomed the Chinese Nationalist government (the Kuomintang), and Chile, Israel, the European Monetary System, among much else.

There is a lot about bimetallism in the united States and elsewhere, which Friedman thinks might have been totally viable - in practice, it would have worked as a single-metal system, with whichever currently had a less favourable market value being used as currency (due to Gresham's Law). Writing in the early 1990s, Friedman is cautiously optimistic to the brave new world of global fiat money (initiated by Nixon in 1971) and is no "gold bug"; he is also, appropriate to the time period, more concerned with inflation than we are nowadays.

It might seem curious that the main disagreement between Keynes and Friedman - basically whether government policy ought to focus on the supply (monetary) or demand (fiscal) side - is is minor, yet Friedman is greatly anathematised by his ideological opponents, who generally assign to him sole responsibility for the crimes of the Pinochet regime (which, if he didn't protest as much as he could have, he certainly didn't support). But that is to look at Friedman as the monetarist and ignore the libertarian ideologue who wrote Free to Choose and Capitalism and Freedom, perhaps inviting a more careful moral scrutiny.

It also strikes me, in a Hirschmanian vein, that there might be moral sentiments underlying this policy debate. Although Friedman doesn't endorse the "sound money" idea of the days of the gold standard, he endorses a kind of conservative moral of thrift and discipline, which when neglected can only be restored by the administration of tough medicine. Keynes, the Bloomsbury hedonist, endorses spending yourself out of trouble, and the idea that nature might not put a price on our folly. Though these arguments are anchored in complex theoretical edifices, it is easy to see why the two have become figureheads of vastly opposed worldviews.

[Clinton · Rating 2 out of 5]

Money Mischief clarifies the significance of monetary economics, for immunization from the impact is unattainable. The book chronicles historical episodes into the mystical phenomena known as money that discusses the creation of value in money, the importance of monetary history and the cause of inflation. The present monetary system affects all spending and savings in the United States of America as well as the globe where it attempts to manipulate money and credit rather than obey sound monetary economics.
The creation of value in money is defined by the belief that stones, precious metals or paper has value in its purchasing power where others are willing to trade goods and services. Commodity money progresses over time as it becomes more and more accepted as valuable whereas paper money has value by decree of legal tender laws. Monetary history reveals the manipulation of money. It was not only recent with paper money but all forms of commodities. These would include coin debasement including clipping and sweating, fixed exchange rates, purchasing programs and disavowing bimetallism. The cause of inflation is driven by the increase in the money supply, and the government is the culprit, yet no government has ever taken responsibility for producing inflation. Government will always blame others, but no other alleged culprit have printing presses nor legal tender laws.
Overall, Milton Friedman presents an fascinating perspective into the subject of monetary economics. The most unfortunate aspect of the book was chapter 8 on inflation, for Friedman offers very convincing arguments as to the cause and cure of inflation, but it was simply copied and revised from Free to Choose. Otherwise, the book was interesting, yet chapter 4 was overly technical and diminished the novelty of the book.

[RK Byers · Rating 3 out of 5]

the analogies didn't start getting good until the very end.

[Jesse Schexnayder · Rating 4 out of 5]

Milton Friedman's account of monetary history in the pre-Industrial to Modern Western world is quite timely in today's fiscal environment. With nation level bailouts becoming all too commonplace in the EU (Greece, Spain, and now Ireland) and the US dollar on the ropes (quantitative easement leading to it being dropped as the world's standard currency) it seems Friedman's predictions regarding the unquenchable desire of modern politicians to fund their political careers through the debasement (i.e. theft) of your hard earned paper currency are coming true, and this correctable fault in our monetary system is one of the most significant causes of the US's current economic woes.

As Friedman (and Thomas Jefferson) have said, the handling of currency is much too important to be left in the hands of central banks, and in the US we don't even know who the members of the that central banking system, the Federal Reserve, are, much less have open access to their books. How convenient for the bankers, and, ah yes, the politicians...

[Rohan · Rating 4 out of 5]

So many years after the original publication date, you would think that this book might not be very interesting before you begin. But trust me, you will be surprised to see how Milton Friedman will keep you hooked on until the last chapter.

There are so many good things in this book. Starting with the concept of stone money on the island of yap, to an analogy of throwing cash into a community from a Helicopter, to the story of Gold and Silver (and Bi-Metallic) Standards and the Coinage act of 1873 followed by an analogy between Inflation and Alcoholism.

At some point, I felt that every second sentence was valuable advice and I could think of entire books being written on such topics by various authors of the day. Examples include: Hyperinflation, Cost of Living Adjustment, Wage Contracts, Price and Wage Controls.

Overall, the best chapter of the book is on Inflation and the last chapter on Fiat Money. I will strongly recommend my fellow economic enthusiasts to read this book. It has definitely changed my perspective of money for life.

[AJ · Rating 3 out of 5]

Milton Freidman is a great read. "Money is much too important a matter to be left to central bankers" neatly sums up his perspective on the necessary role government must play in shaping monetary policy. This book explains the symbolic properties (or "myth") of money, touches on the history of the gold and silver standard in the US and abroad, and focuses narrowly on a retrospective analysis of whether US monetary policy made the right decisions with regard to the precious metals and money. Following is a great discussion of inflation, how it works, why it's bad, and what can be done about it.

There are a fair amount of charts, and one chapter devoted fully to modeling hypothetical alternatives to history, essentially full-blown economic analysis. Even so, don't let that stop you from grabbing it.

[Ray · Rating 4 out of 5]

Marvelous fun and very illuminating.

Friedman starts out with a South Pacific island whose idea of money is gigantic immobile rocks you keep in your backyard, and then goes on, after a nice explanation of inflation (that I'd not gotten before, but was fairly detailed on a toy example involving a helicopter dropping cash) to a fairly detailed discussion of the whole bimetallic vs gold standard debate that raged through world politics in the 19th century.

I didn't know that the Industrial Revolution basically happened here during a period of sustained deflation, and I think I finally understand what that mess over the "cross of gold" was about. Friedman has a gift for explaining things in a way that gives me an intuition for the subject - a feeling I usually associate with slowly digested math texts, not easily read books about history.

Highly recommended.

[Richard · Rating 4 out of 5]

Substantial inflation is always and everywhere a monetary phenomenon. To produce continuing inflation, one requires a printing press on which one can turn out those pieces of paper that we call money. Thus it is folly to blame inflation on anyone but the government.

A metallic standard (gold, silver, or bi-metallic) necessarily introduces volatility to price levels and leads to an inefficient allocation of resources, but it also disciplines the government's printing presses.

The Nobel Prize winner also provides a compelling explanation of how FDR's ill-conceived silver policy aided the communist revolution in China.

[Katy · Rating 3 out of 5]

This was tough going. Since I don't have an economics background, the detailed explanation of bi-metalism and national economic policy was very difficult for me. The last few chapters on the causes of inflation were quite enlightening. Surprisingly, Friedman uses a quote from John Maynard Keynes, who advised FDR during the Great Depression as a chapter heading: "There is no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." Rather provocative...

[Azriel · Rating 4 out of 5]

Despite Friedman's wit and clarity, this is difficult material to work through. More so when he takes an entire chapter to work through the extended math of several of his asumptions. I recommend everyone who has any interest in economics to read the first and 8th chapters. The first explains that money is merely a medium of exchange, and clarifies why fiat money is fully valid. Chapter 8 covers inflation, and dispells many myths that still get involked 25 years later.

[John Boys · Rating 5 out of 5]

Recommended Reading

Milton Friedman is gone, but his thoughts and historical observations about the monetary role in relation to inflation are of paramount importance. His book Money Mischief brings perspective of the inflationary danger, especially to those younger people, who did not live through the hyperinflation of the 1970s.

[Alex Gravina · Rating 4 out of 5]

A wonderful piece of economic thought, ever the more relevant thanks to our current inflation.

It's entertaining that he thinks the Euro something that couldn't possibly be created.

[cypher · Rating 4 out of 5]

catchy tone to present a topic which might not feel the most engaging for some. some interesting information, even if some is a little outdated.

[Teyanna Munyan · Rating 3 out of 5]

Good book. Learned about the gold&silver standard in the US and learned a bit more about inflation & money. The island of Yap with their stone money was interesting and the helicopter inflation analogy was good. I wish it had an epilogue by another author that ties in the last 20 years to the book, so it wasn't so outdated (well I guess a second epilogue since it already has a short one by Milton Friedman). I thought he might have been a tad too harsh on central bankers.
Quotes I liked from the last chapter:

"It is natural for individuals to generalize from their personal experience, to believe that what is true for them is true for the community. I believe that that confusion is at the bottom of most widely held economic fallacies - whether about money... or about other economic or social phenomena."

"It is a disagreeable custom to which one is too easily led by the harshness of the discussions, to assume evil intentions. It is necessary to be gracious as to intentions; one should believe them good, and apparently they are; but we do not have to be gracious at all to inconsistent logic or to absurd reasoning. Bad logicians have committed more involuntary crimes than bad men have done intentionally.~Pierre S. du Pont"

[Timothy Taylor · Rating 1 out of 5]

This review is for the Audiobook version.

I did not much enjoy Money Mischief. This was largely due to the audiobook format. This format does not suit this book at all. There is a large amount of technical discussion about economics including ratios and formulas that is just hard to follow in an audiobook format, despite one whole chapter being omitted specifically because it would be too technical for narration. I think the material would have been much easier to digest if there was time to reread and mull over sections before continuing.

As for the material itself, it was for the most part stories not well told, nor really worth telling. The first section covering stones being used as currency in the Pacific Islands hinted at being interesting. The remainder of the stories dealing with bimetallism, the gold standard and the impact of money on various global economies in the late 19th and early 20th centuries was not very compelling. In addition, despite Milton Friedman being an historic economist, he sometimes confuses tax rates and tax brackets and clearly does not understand what Taxation without Representation is.

[Brad Mills · Rating 5 out of 5]

Published in the 90s, this book dives into various monetary gyration episodes in history to illustrate the crucial role that central banks & politicians & their (mis)management play in causing inflation or deflation, the health of economies, and the financial health of its citizens.

Since we've been currently going through the largest spike in inflation in my generation's history, I wanted to go through this book to see what Friedman might have thought about today's inflationary disease that's been spreading.

Here's some points I took away from the book that links the past to current inflationary issues:

Trust & the the Island of Stone Money:
Friedman starts with the story of the Yap islanders who used large limestone wheels (rai stones) as money. The islanders would move the stones to each other's properties as a form of payment. Even when one of the stones was lost at sea during transport, it was still acknowledged as being 'in circulation.'

This serves as a metaphor for the concept of trust in modern fiat currencies, which are not backed by gold anymore, and are mostly faith-based.


Fiat vs Silver and Gold backing:
Friedman described the bimetallism debate in the U.S., which was a period in monetary history where fierce lobbying & debate was happening around whether or not silver, gold or a mixture of both, should be money or back the dollar.

The importance here is understanding the consequences of pegging a currency's value to a commodity whose value can fluctuate based on global supply and demand.

The comparison today could be the fact that the US Dollar is the global reserve currency of the world, and many other countries are de facto "backing" their economies with USD, or taking on USD debt.

When the central bank raises interest rates & when the US inflates the supply of money, this puts enormous pressure on these countries, driving crushing inflationary forces globally, even faster than in the United States.

Central Bankers cause boom/bust cycles & make Depressions worse:
Friedman criticized the Federal Reserve's role in exacerbating the Great Depression, mainly by allowing a severe contraction in the money supply. This is a reminder of how mismanagement of money supply can have catastrophic consequences.

Recently, through 2021-2023, after record money printing, we've also seen one of the largest contractions in the money supply in US history. The result of this massive contraction of the money supply combined with the fastest jacking of interest rates is record losses in stock & bond markets. Many think we are living in a Silent Depression, where half the country is doing well and half the country is economically depressed. Time will tell.

Central banks often became sources of monetary instability through history. Friedman pointed out the tendency of these institutions of unelected money masters to either over-react or under-react to economic conditions, thereby exacerbating problems.

The book also also talks about what caused inflation in the past. Here are the top reasons:

Mismanagement of Money Supply: The largest contributing factor to price and asset inflation is usually the central bank or the monetary authority increasing the money supply faster than the growth in supply of goods and services. More money chasing fewer goods.

Government Deficits: Politicians who spend more than they collect in tax revenues usually resort to printing money to finance their deficits, leading to inflation. Of course this inflation might not always show up in official statistics because the numbers are massaged to suit the political agenda. As we see currently, western governments are telling us inflation has come down from nearly 10% to 3%, yet our costs of housing, food and energy are still rising. (I wonder who believes these numbers put out by the government.)

Exogenous Events: Though less frequent, certain global phenomena, such as a coordinated increase in the price of a critical resource like oil, can spur inflation. The recent lockdowns and supply chain disruptions caused by the government response to covid & the Russia/Ukraine war are examples of external factors that drive inflationary impulses in consumer prices of some goods.

Everyone should go through this book.

Politicians, Central Bankers & Big Banks are to blame for inflation.

Governments globally have been involved in massive fiscal spending, issuing record debt - and central banks have been financing that debt in league with the politicians, expanding their balance sheets to gluttonous levels.

Central banks regulate & give money printing licenses to the commerical banks, who have been creating credit as fast as people want to borrow. Most of the tens of trillions in new money of the last ~decade has been created digitally from nothing by banks in this way.

This is all akin to printing money.

Friedman's theories would suggest that such large-scale monetary expansion would be a direct cause of inflation.

With the US National Debt beyond $30 trillion, this level of debt is alarming. Historically, high levels of debt have put pressure on governments to resort to inflationary measures to reduce the real value of their obligations.

This is what we see happening globally, which leads to hyperinflation in some cases (unlikely to happen in G20 countries.)

As Friedman highlighted in various examples, governments and central banks often try to attribute inflation to external factors, blaming 'greedy capitalists' or external factors, downplaying or ignoring the role of their own monetary policy manipulations.

Wealth inequality has gotten worse and worse since Friedman's time because of the fiat money and the fallible humans in charge of the monetary levers.

Great book, and I'll probably go through it again some time.

[José Joaquín Fernández · Rating 5 out of 5]

La historia de la Isla de Uap (o Yap) donde usaban piedras como dinero es impresionante y como eso se asemeja a la civilización occidental donde se usa papel como dinero.

En otro capítulo, Friedman argumenta como la política intervencionista del expresidente de los EE.UU., Franlin Delano Roosevelt, con el fin de elevar el precio de la plata, que empezó en 1933, contribuyó al triunfo del comunismo en China. “… the silver purchase program contributed to the ultimate triumph of communism in China”. (p.188).

Llama la atención la preferencia de Friedman por el symentalismo sobre el bimetalismo y este sobre el monometalismo. “… bimetalism, on theorical, practical and historical grounds (is) superior to monometalism, though not to symmetalism or to a tabular standard” (p.155)

[Abdelhamid · Rating 5 out of 5]

Milton Friedman covers a number of interesting episodes of monetary history in this book. The episode about the bimetallic money system the U.S. had until the 1870s is really fascinating. Also the discussion of inflation and the incentive the government may have to use inflation to finance spending is very relevant to our current day problems of growing national debt and federal budget deficit. I highly recommend this book to anyone who wants to learn more about money and its history.

[Terry Koressel · Rating 2 out of 5]

I am sure this is an excellent book....I am a huge fan of Milton Friedman. However, I am sad to say that the intricate and detailed economics in Money Mischief were over my head....in some parts, way over my head. It is one of the very few books I did not finish. I would not recommend the book unless you have a mind or training to understand complex economics (particularly monetary theory).

[James Koppen · Rating 3 out of 5]

I didn't actually finish this book, but I'm done for now. The first chapters kept my attention but once he began to explain an alternate financial history - as in what he thinks would have happened, hypothetically, had a certain monetary policy been effected in the late 1800s - with graphs and tables I stopped reading.

[Don · Rating 5 out of 5]

Superb non-technical examples of just how much "money matters". Fun reading for economic history types as well as people interested in monetary economics. Leftists may enjoy a good exposition of the monetary policies of 19th century American populists (including William Jennings Bryan).

[Void lon iXaarii · Rating 3 out of 5]

Very cool stuff. I particularly liked the hypothetical money from the helicopter reasoning flow mental exercises and I of course adored the stone money real situation and the parallel to the France-US incident.

[A. Tebbs · Rating 4 out of 5]

It's a bit technical at times, but he explains why hard currency is so necessary. I greatly admire this man and I love how he exposes fraud

[Aharon · Rating 3 out of 5]

A very smart man who works very hard to convince you that he’s not actually making dumb assumptions (which he is). Not to be confused with his “Monkey Mischief!” series for kids.

[Jen]

Slow going, not my typical book. Good content though...I gave up half way through.

[Chris Fellows · Rating 4 out of 5]

No matter how many things I read, I am still surprised from time to time to find vast swathes of human knowledge of which I am totally ignorant. Now I understand bimetallism! Huzzah!

[Todd · Rating 4 out of 5]

Excellent real life studies in economics. Some very compelling ideas and thought provoking on humanity, money, power and freedom.

[Stephen Frank · Rating 4 out of 5]

A must read for investors interested in understanding the possible consequences of quantitative easing.

[Dave Peticolas · Rating 3 out of 5]

A short introduction to monetary history and the causes of inflation.