Velocity of Money: Milton Friedman's Waterloo Battle

Abstract

There is a long-negligent defect in Friedman's monetary framework. Friedman overlooked the common wisdom that, in the long run, along with the institution and technology changes, the velocity of money would be accelerated substantially. If no corrective factors to cancel the impact of the accelerative velocity of money, the demand for money would be unstable. Friedman neither set up explicit assumptions for this allowance; nor perceived that his empirical findings conflicted with the fast changing realities. Friedman's paradox attributes to the deceiving of the disabled income velocity of money, the inheriting of the Cambridge's equation and the misguiding of the long-negligent defect of Keynesian framework (discuss on next paper). Friedman followed money at rest tradition solely, so his framework is rested on the one-sided ground. Friedman and Keynes' long-negligent defects still hamper the initiative of our mind to varying degrees.