Most of my broker friends and investors were in a somber mood that Monday evening, stunned by the 509 point drop in the Dow. I was ebullient because by some fortune I sent out a "flash alert" on September 8, 1987, six weeks before the crash, telling my subscribers: "The coming credit squeeze could devastate the stock and bond markets; get out now! I advise you to sell all stocks and long-term growth mutual funds."

That evening, my wife had arranged a surprise birthday party. I had a lot of fun, but the party ended early as friends rushed home to check the financial news overseas.

Was the crash a portend of something more ominous, another Great Depression perhaps? After all, a similar stock market crash occurred in October, 1929, followed by the worst economic collapse in world history.

One of my technical trader friends was deeply worried. His trading system was based on moving averages of stock indexes like the Dow. At the New Orleans investment conference a month later, he showed a chart of the Dow with a "triangle" formation. He pointed to the triangle. "If the Dow breaks below the triangle formation," he warned, "the Dow could fall another 1,000 points or worse!"

I thought it was all a joke, but he was dead serious. He staked his reputation on his prediction. A few days after Black Monday 1987, the Dow started falling again, ominously below the point of the triangle. Yet, miraculously, the Dow never crashed. In fact, it rallied to new highs. My friend soon ended his newsletter, shamed perhaps by his failure to predict the next Great Depression.

As a macro-economist, I look at the economic fundamentals before making a prediction. And, in the case of the Black Monday October, 19 1987, crash, the economic fundamentals looked to me to be largely sound. Business across the nation was doing well, both before and after the crash. The economy was growing, inflation was under control, and interest rates were relatively stable. So while I anticipated short-term trouble, I thought the long-term outlook looked good, and it wasn't long before I started recommending stocks again.

So why did the Dow Jones Industrial Average collapse by 22% on Black Monday October 19, 1987?

Historians point to several factors, such as comments by the Treasury Secretary about a weak dollar and trade deficit, but I believe the crash can be blamed in large measure on an impulsive "Mr. Market" and the technical traders who encouraged mindless trading based on a line on a chart rather than business fundamentals. Too many investors were listening to my friend with the charts.

In the summer of 1987, telephone-switching between no-load mutual funds was all the rage, based solely on a technical charting system of a 39-week moving average. Mutual fund investing was extremely popular, to the point where you couldn't go through a meal at home in the evening without a broker calling and telling you about the latest mutual fund. Few investors knew or cared about the companies the fund managers were buying. Just follow the line on a chart showing the mutual funds were moving higher. The brokerage business had become so successful that a book was released that year written by a Merrill Lynch broker entitled No Experience Necessary: Make $100,000 a Year as a Stockbroker (Simon & Schuster, 1987). How? By buying and selling mutual funds.

As a result, the market got way ahead of itself, with everyone following the same charts. Then when the price of the mutual funds went below their 39-week moving averaging, on the Friday before the Monday crash, everyone sold at once. The October 19, 1987 crash was purely a technician's folly, and with the business fundamentals sound, the market quickly recovered within a few weeks.

As we celebrate the 20th anniversary of the Black Monday October 19, 1987, the media has recently asked me repeatedly this question: What factors could cause the stock market to collapse again? Or are we immune to another financial disaster?

Here is my answer: There are several potential financial crises out there that could cause the market to suddenly turn south. At the beginning of this year, I attended the American Economic Association meetings in Chicago, where I was fortunate to attend a luncheon with Fed chairman Ben Bernanke. He wouldn't take questions about current Fed policy, including interest rates, but he spoke volumes when he gave his formal talk to us at the luncheon. Ostensibly, the topic was "Central Banking and Bank Supervision in the United States," but reading between the lines, it was clear to see that Bernanke was worried about a financial storm ahead.

In his speech, he used the terms "crisis," "risk," "panic," "threats," "stress," and similar words at least 36 times.

Bernanke said that the Fed has set up a "crisis center" to handle potential global financial problems - to anticipate them, and to deal with them if they occur. What are the possibilities?

• A dollar collapse, like the one Paul Volcker suggested would happen in the next few years. (We're certainly moving in this direction.)
• A non-dollar currency crisis in Asia, Europe or Latin America (shades of the 1997 Asian currency crisis).
• A housing crash and foreclosure crisis (we suffered one this summer).
• A major terrorist attack on a financial center, such as New York, London or Tokyo.
• A sharp unexpected rise in inflation.

Bernanke revealed the various policy measures the Fed might take in response to a crisis: buying government bonds, providing overdrafts and other short- term credits to banks, facilitating currency swaps (to boost the dollar), and "securities lending," that is, lending money to institutions to buy stocks.

In sum, the answer is always the same: inject liquidity into the system to keep the stock market from collapsing. So far it's worked like a charm. Alan Greenspan applied this bailout policy several times during his 19-year tenure – during the Black Monday October 19, 1987 crash, and 1997 Asian currency crisis, the Y2K computer threat, and the 2001 terrorist attacks. (His new book "The Age of Turbulence" addresses all these events in detail.)

Bernanke had his first test this past summer with the mortgage credit crunch. The world's markets were on the verge of collapse on August 18 when the Fed intervened... by injecting liquidity.

But what if the same old medicine stops working, and the Fed injects liquidity, but the dollar and the stock markets keep on falling? There's only one protection: buy gold! And buy the products gold will buy. And that raises the specter of hoarding and the collapse of the world monetary system. And that leads to social unrest and... the institution of new emergency powers by the Federal government.

Mark Skousen
for The Daily Reckoning Australia

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Hans Sennholz was an inspirational speaker at investment conferences in the 1970s and 1980s. I heard him first at a Howard Ruff conference in the early 1980s. Speaking in a mesmerizing German accent, he was spellbinding and always got a standing ovation. I wished I had his facility of expression.

But Hans Sennholz was also a doomsayer who throughout his life was probably wrong more than right about the outlook for stocks and bonds. He always thought high inflation was just around the corner, and Wall Street was headed for collapse at a moment's notice.

Sennholz was a thorough-going gold bug, a devoted follower of Ludwig von Mises and a critic of anyone who opposed the gold standard. He wrote books with titles such as "Inflation or Gold?", "Debts and Deficits," "The Age of Inflation," and "Money and Freedom." When Milton Friedman died late last year, he took the Chicago school to task for advocating monetary inflation. "In its search for stability," wrote Sennholz, "the Friedman amendment, unfortunately, proceeds on the old road to nowhere. There is no absolute monetary stability, never has been, and never can be." For Sennholz, a true Misesian, there was only one solution to inflation: return to the classical gold standard, where the dollar is backed by gold.

Hans Sennholz's  plane was shot down by allied troops and he spent several years as a POW in the United States. After the war, he discovered Mises and returned to the United States to earn his Ph. D. in economics in 1955 from New York University, where Mises taught. For 37 years, he taught some 10,000 students Austrian economics at Grove City College in western Pennsylvania. (Peter Boettke, top Austrian economist at George Mason University, is one of his students.)

Sennholz was a prolific advocate of the Austrian school, writing 17 books and over 500 articles during his career. He wrote regularly for "The Freeman," "Human Events," and financial publications such as "The Inflation Survival Letter." Since 2000, he wrote online columns. He and his wife Mary (also an editor and writer) once met Ronald Reagan, who said "I've been plagiarizing you for years."

But Hans Sennholz was best as a powerful electric speaker with that unforgettable German accent. He flew his plane all over the country giving speeches on the evils of inflation, deficit spending, and the falling dollar before bankers, stockbrokers, businessmen and religious leaders. I first met him at a Howard Ruff conference in the late 1970s. After hearing him for only a few minutes, you were smitten by this true believer and a gold bug. He was the Douglas McArthur of Free-Market Economics.

Like Ludwig von Mises, Sennholz was a pessimist. In the 1970s, he warned that America was headed toward an inflationary Armageddon. During the inflationary seventies, he debated John Exter, a former Citibank executive, on "Inflation or Deflation?" While Exter predicted massive deflation, Sennholz warned of triple-digit inflation. Both were proven wrong, and did not anticipate the supply-side revolutions of Reagan and Thatcher, which brought sanity back to the global economy.

Even then, Sennholz thought the Reagan-Thatcher revolution was temporary, and remained a pessimist. His final column, "Money is flooding the world markets," written May 19, 2007, states: "A few pessimistic economists are convinced that a devastating economic cataclysm lies ahead. They usually point to three threats that may have a serious impact on the American economy. There is the burgeoning tower of public and private debt resting on a foundation of greed and overindulgence. There are a multimillion dollar list of promises to a retirement system and a vast building of government guarantees and promises that are bound to be unkept. There even is a world of complex derivatives, the value of which depends on something else, such as stocks, bonds, futures, options, loans, and even promises. They all, according to these economists, will be the victims of the coming cataclysm. This economist, who has observed central bank policies since the 1950s, is in basic accord and feels sympathy for these pessimists."

Yet the amazing thing is that despite this negative outlook, Hans Sennholz was an astute investor and died a very wealthy man. How is this possible? He was always predicting a crash in the stock market, he was bearish on bonds, and he seldom did well trading commodity futures. What's left? Surprisingly, he made millions in small town real estate! Over the past 50 years he bought and sold numerous rental properties in his college town of Grove City, Pennsylvania, and other near-by locations. At one time Hans Sennholz was probably the largest landlord in Grove City. He even owned the property where we held his funeral!

He sold off a lot of his real estate when, in 1992 at the age of 70, he and his wife Mary took on the daunting task of reviving the Foundation for Economic Education. FEE was the first free-market think tank founded by Leonard Read in 1946 in Irvington-on-Hudson, New York. After Read died in 1983, FEE struggled financially and lost its influence. Sennholz came in and over the next five years righted the ship. He fired people and slash the budget, and got it back on course. In 1996, FEE celebrated its 50th anniversary by having Margaret Thatcher as the keynote speaker.

It was during his tenure as president of FEE that I got to know Hans Sennholz personally. He frequently invited me to speak at FEE's monthly lecture series. I invite all my subscribers to come and we had big crowds at the FEE mansion. At the beginning of my talk, I'd turn to Hans and ask him to tell my subscribers all about FEE. In that unmistakable German accent, he spoke eloquently for 10-15 minutes and convinced people to donate to a good cause. Later he asked me to be a columnist for "The Freeman." He also had FEE published the third edition of my book, "Economics of a Pure Gold Standard." I am convinced that my becoming the president of FEE in 2001-02 was directly the result of Hans Sennholz's unwavering support.

I was privileged to participate in writing a collection of essays in honor of Sennholz when he retired from full-time teaching at age 70, A Man of Principle (Grove City College, 1992). My favorite book by Hans Sennholz is called "The Politics of Unemployment" (Libertarian Press, 1987). His books are available here, a site run by his son Robert.

Douglas McArthur used to say, "Old soldiers never died, they just fade away." Hans Sennholz may have faded away, but he shall never be forgotten.

Regards,

Mark Skousen
for The Daily Reckoning Australia

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Today history may confirm that there was more truth to Adams’s "lie" than previously thought. Having updated Franklin’s Autobiography for modern times, including the remaining 33 years of his illustrious career, I conclude that Franklin can feel a certain degree of responsibility for America’s growth machine. Throughout his life and writings, he did more than anyone else to lay the groundwork for wealth creation in the emerging nation.

Moreover, the record seems to indicate that Benjamin Franklin’s diplomatic genius was indispensable in the American Revolution. Washington may have won the war at home, but Franklin won the war abroad. Without his brilliant diplomacy, the French might never have provided the military and financial aid - over one billion dollars! - essential to achieve American independence from the British. Finally, Franklin was played a vital role in fashioning the compromises necessary in creating the new constitution of the United State in 1787.

Benjamin Franklin anticipated the incredible material and technological progress since our founding. An incurable optimist, Franklin was always bullish on America, and life in general. At the end of the War for Independence, he predicted, "America will, with God’s blessing, become a great and happy country." The United States, he said, is "an immense territory, favored by nature with all advantages of climate, soil, great navigable rivers and lakes....[and] destined to become a great country, populous and mighty." He told potential European immigrants, that the country "affords to strangers....good laws, just and cheap government, with all the liberties, civil and religious, that reasonable men can wish for." (He underlined the word "cheap.")

Franklin might be considered the first dean of colonial America’s business school. He chronicled much of his business success in his Autobiography, creating the first "rags to riches" story in American history. Business luminaries from Andrew Carnegie to Lee Iacocca to Warren Buffett have publicly expressed their admiration of Benjamin Franklin. In his "Advice to a Young Tradesman," Franklin wrote, "In short, the way to wealth, if you desire it, is as plain as the way to market. It depends chiefly on two words, industry and frugality; that is, waste neither time nor money, but make the best use of both. Without industry and frugality, nothing will do, and with them everything."

Franklin knew how to succeed in business and became one of the wealthiest men of his day. He favored the entrepreneurial can-do spirit of Americans in his Autobiography and, in later writings, lambasted public offices of privilege and aristocracies by birth. In an open letter to European immigrants, he wrote, "I told them those bear no prices in our markets. In America, people do not inquire concerning a stranger, What is he? but What can he do?" The author of Poor Richard’s Almanac and "The Way to Wealth," Benjamin Franklin preached throughout his life the virtues of "industry, thrift and prudence" as universal principles of success. Undoubtedly he would castigate today’s Americans for indulging in undersaving, overspending and excessive debt. "No revenue is sufficient without economy," he warned. "A man’s industry and frugality will pay his debts and get him forward in the world.... Business not well managed ruins one faster than no business."

He made his fortune as an innovative publisher, producing the country’s best-selling newspaper and almanac and profiting from a chain of printing partnerships up and down the Atlantic seaboard. Franklin was also a practical inventor (Franklin stove, the lightning rod, bifocals, etc.), but being publicly minded never collected royalties or trademarks from these ventures. The maxims contained in the pages of his Poor Richard’s Almanac served to educate a nation of craftsmen, farmers, and shopkeepers as to how to succeed in business. For certain, he would be pleased with the state of higher education in America – especially our nation’s business and professional schools. Prior to Franklin helping found the University of Pennsylvania, the only colleges in existence were established for the purpose of training clergy. With Penn, Franklin promoted a more radical model of a public university where science and the professions were given their due. Since that innovation, professional schools turn out the talent that fuels and leads our nation’s economy.

In the Autobiography, Benjamin Franklin dared to declare his 13 principles of virtuous living essential to lasting prosperity. "Only a virtuous people are capable of freedom. As nations become corrupt and vicious, they have more need of masters," he warned. Nevertheless, he remained upbeat. "America is too enlightened to be enslaved." Franklin used his autobiography and maxims to promote such virtues as honesty, hard work, thrift, doing good to others, and the power of a good reputation. He more often than not utilized the power of reward in getting others to cooperate rather than relying on the power of punishment. "A spoonful of honey will catch more flies than a gallon of vinegar," said Poor Richard. As such, Franklin is an ideal role model for modern American entrepreneurs who constantly manage the tension to compete and cooperate in any given business situation. He counsels us to protect our interests and guard against foolish risks while at the same time helping others to succeed. Rather than counsel us to dominate the game like Machiavelli, Franklin shows us how to lift the boats of those around us – as well as our own.

Although not a church-goer, Benjamin Franklin supported a pragmatic religion that favored good works and charity more than simple faith and hope. "I mean real good works, works of kindness, charity, mercy, and public spirit; not holiday-keeping, sermon-reading or hearing, performing church ceremonies, or making long prayers, filled with flatteries and compliments, despised even by wise men, and much less capable of pleasing the Deity." Franklin was famous for engaging in innumerable civic and charitable causes throughout his adult life--and into the afterlife, with his perpetual fund for young tradesmen in Boston (as established in his will).

On the dark side, Franklin, ever the opportunist, was never above seeking government privilege for him and his relatives. He printed currency for several states, "a profitable job." In 1753, he landed a lucrative position as the Crown’s deputy postmaster general of North America. While in England, he convinced the British leaders to appoint his son William royal governor of New Jersey. After Franklin left for Paris in 1776, he appointed his son-in-law to take over his job as postmaster of the United States. For years, he actively sought a land grant from the Crown in Ohio. But the American Revolution soured his attitude toward public privilege and corporate welfarism. He failed to obtain a land grant. His royalist son abandoned him during the war and they never reconciled. He trained his grandson Benny to be a printer rather than a government agent, telling a friend, "I am of the opinion that almost any profession a man has been educated in is preferable to an office held at pleasure, as rendering him more independent, more a freeman and less subject to the caprices of superiors."

The rift between father and son is one reason Franklin often said, "There never was a good war or a bad peace." It destroyed forever his close relationship with his son William, as well as his friendships with many other British and American confidants. Another reason why Franklin considered wars at best a necessary evil is that it kept him from his first love: his inventions and scientific pursuits. He constantly complained in England and France how little time he had to correspond with fellow scientists and to pursue his own creations. When the war was over, he immediately tried to pick up where he left off, working on several inventions, such as the long arm to withdraw books from high up on a shelf. But he felt the war cut short his dreams of technological revolution, and his ability to discover and create innovations.

What were Benjamin Franklin’s politics? He was no social libertarian, despite his image as a libertine and religious free thinker. While he is famous for reading books in the nude, frequenting the salacious Hell-Fire Club in London, and flirting with French ladies in Paris, he wrote stern letters to his daughter Sally chastising her for wanting to wear the latest fashions while a war was going on, and refused to buy his grandson Benny a gold watch while in France. He dressed plainly and constantly preached economy. He promoted at all times frugality and industry in both public and private life. Readers might be surprised by Franklin’s attack on the growth of taverns in Philadelphia upon his return from England in 1762. He hated mobs of any kind, and though a defender of free speech, railed against scurrilous newspaper reports.

In many ways, he was politically ahead of his time among founding fathers. That he was a radical democrat is clear from his support of a unicameral legislature. Actively involved in the creation of the three major documents of American government (the Declaration of Independence, the Articles of Confederation and US Constitution), Franklin was an advocate of a limited central government. "A virtuous and laborious people may be cheaply governed," he declared. He was a disciple of Adam Smith and free trade, and was enamored with the laissez faire policies of the French physiocrats (Turgot, Condorcet, et al.). "Laissez nous faire: Let us alone....Pas trop gouverner: Not to govern too strictly."

He defended the rich, and worried about how incentives for the poor would be affected if the state adopted a welfare system. He opposed a minimum wage law, and wrote in favor of free immigration and fast population growth (he was no Malthusian). He rejected any form of state religion or mandatory religious oaths of office, and demanded that slavery be abolished in the new nation - in 1789. And he learned by sad experience (through his son and grandson) that public service is less rewarding than private business. His foreign policy anticipated George Washington’s farewell address by nearly 20 years, when he wrote in 1778: "The system of America is to have commerce with all, and war with none."

Yet Franklin was no free-thinking anarchist. In economics, he favored paper money and an inflationary monetary policy beyond specie, though "no more than commerce requires"; easy money would stimulate trade, he wrote, and even rapid inflation during the war paid for itself through its power of indirect taxation. (His likeness on the $100 bill - the highest denomination - of an irredeemable American paper currency would greatly please his vanity.) He was a strong supporter of central banking and an investor in the Bank of North America. He argued that the state should be actively engaged in the free education of youth and other public services, and in dispelling ignorance of public fads and superstitions. From several sources, it appears that Franklin was in league with Jefferson in emphasize the theme of "life, liberty, and the pursuit of happiness" as the goal of government, downplaying the Locke’s inalienable right to property. Property, he wrote, is purely a "creature of society" and can be legitimately taxed to pay for civil society. He was quite critical of Americans unwilling to pay their fair share of society’s "dues."

Finally, Franklin was ahead of his time in financing good causes with his business profits. He was civil minded early in his career, helping to finance the first fire company, the nation’s oldest property insurance company, and Philadelphia’s own hospital, library and militia. "America’s first entrepreneur may well be our finest one," concludes John Bogle.

Business executives would do well to live up to the epitaph Benjamin Franklin once described to a friend: "The years roll round and the last will come; when I would rather have it said, He lived usefully, than he died rich."

Regards,

Mark Skousen
for The Daily Reckoning Australia
 

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Yet there was a stark contrast in the two sessions. The Friedman room was expansive and held more than a thousand enthusiasts, while Galbraith's session attracted no more than 50 people. Some of the difference can be explained by the fact that the AEA meetings were held in Chicago, where Friedman taught for 30 years, and because two of the speakers were Nobel laureates, Gary Becker and Bob Lucas.

However, there is little doubt that if these two economists were honored 50 years ago at an AEA meeting, their fortunes would have been reversed. In the late 1950s, Friedman was a relatively unknown professor at Chicago who was regarded as a "reactionary" monetarist devoted to extreme laissez faire. Galbraith was hailed as the "progressive" Keynesian from Harvard who eloquently understood "American Capitalism," and articulated the "countervailing powers" of Big Business, Big Labor, and Big Government. In 1958, his bestseller, "The Affluent Society," made a convincing case for redistributing wealth and progressive taxation as the only legitimate solution to the widening gap between "private opulence" and "public squalor." Galbraith went on to become a member of the "new economics" team of the Kennedy Administration and ambassador to India. In 1967, Galbraith completed his trilogy with "The New Industrial State" at time when America's financial institutions were flexing their muscles around the globe. Galbraith reflected this hubris: The "technostructure" of big business could control markets and manipulate consumers through planning and advertising, and was no longer beholden to shareholders, consumer sovereignty, or supply and demand. The Sixties were the high tide of Keynesian economics and fine-tuning the economy.

But a series of unpredicted crisis and trends in the late 1960s and early 1970s opened the door for Milton Friedman and the growing band of free-market economists. The West suffered a sharp rise in inflation and economic crises, and American manufacturing lost its dominance in the world economy. It was time for a counter-revolution to the Keynesian-Galbraithian monolith.

At Chicago Friedman's rigorous analysis of the business cycle and free-market solutions started paying dividends. His mammoth "Monetary History of the United States," published in 1963 and co-authored with Anna J. Schwartz, gradually convinced the economics profession that the Great Depression was not a result of "bad" distribution of income, "bad" corporate structure, and a "bad" banking system, as emphasized by Galbraith in his book "The Great Crash," but largely because of "bad" government policy by the Federal Reserve, which allowed the money supply to collapse by more than one third. Friedman's achievement was a triumph of empirical economics that Galbraith could never match.

Friedman and other market economists also countered Galbraith's "social imbalance" thesis in "The Affluent Society." The Keynesian "tax and spend" solution had failed miserably to redress the gap between private affluence and public poverty because government often lacks the market incentives to cut costs and meet the needs of its customers, the taxpayers, in an efficient way. In his 1962 book, "Capitalism and Freedom," Friedman argued that the solution to this social dilemma was to expand the market (supply side economics) and apply market principles to public enterprise where feasible. This led to the privatization movement around the world, where country after country systematically denationalized, deregulated, and privatized public enterprises and services, especially after the collapse of the Soviet centralized planning model in the early 1990s.

Unfortunately, Galbraith seemed to be oblivious to these dramatic changes. In the 40th anniversary edition of "The Affluent Society," Galbraith had a chance to revise his thesis in light of the worldwide movement toward freer markets. Yet the privatization solution completely eluded Galbraith's mind. He chose not to even mention it.

In sum, one gets the impression that Friedman and other the free-market schools are today's "progressives," offer new bold solutions to public issues in education, welfare, and fiscal policy, while Galbraith and the old-style Keynesians are the "reactionaries," unwilling to entertain the new market solutions to public problems. Over the past 30 years, Friedman's star has risen while Galbraith's has fallen. Well did George Stigler conclude, "All great economists are tall. There are two exceptions: John Kenneth Galbraith and Milton Friedman."

Regards,

Mark Skousen
for The Daily Reckoning Australia

Editor's Note: Dr. Mark Skousen is is a professional economist, financial advisor, university professor and author of more than 20 books. Dr. Skousen has taught economics and finance at Columbia Business School, Barnard College at Columbia University and Rollins College in Winter Park, Florida. He has appeared on ABC News, CNBC Power Lunch, CNN, Fox News, and C-SPAN Book TV.

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We met at his favorite restaurant in San Francisco, where I showed him a picture of him standing next to John Kenneth Galbraith, the premier Keynesian and welfare statist of the 20th century.

Galbraith towered over the diminutive Friedman. Beneath the picture was a funny line by George Stigler: "All great economists are tall. There are two exceptions: John Kenneth Galbraith and Milton Friedman." Milton was so pleased with the photo and caption that he sent it to all his friends only two weeks before his passing.

Milton had just turned 94, yet his mind was sharp. We discussed the latest Nobel Prize in economics. He said, "We’re running out of good names." What about the new field of behavior economics that Richard Thaler (Chicago), Robert Shiller (Yale), and Jeremy Siegel (Wharton)? "Yes," he agreed. "They are making an important contribution. Siegel worked with me at Chicago in the 1970s and is doing brilliant work."

"All great economists are tall. There are two exceptions:
John Kenneth Galbraith and Milton Friedman." --George J. Stigler

(Left to right: George Stigler, Milton Friedman, John Kenneth Galbraith.
Creation of Mark Skousen. Technical assistance by James Durham.)

I asked Milton if he wouldn't mind giving me a blurb for my next book, "The Big Three in Economics." He loved my previous history, "The Making of Modern Economics," and agreed to give me a quote. It saddens me to know he never got to it.

For the past few years, he walked with a cane. He suffered from pain in his legs, a weak heart (after two heart surgeries in the 1980s), and was losing his eyesight. As we left, I asked him, "Do you think you’ll live to be 100?" He answered quickly, "I hope not!"

A few days later he fell and was taken to the hospital. He died a couple weeks later of a heart attack.

Friedman was not only a great economist, but a memorable quotesmith. Besides the standard bearers, such as "Inflation is always and everywhere a monetary phenomenon" and "There's no such thing as a free lunch," here are some others less well known:

"Competition is a tough weed, but freedom is a rare and delicate flower." -- (with George J. Stigler)

"If a tax cut increases government revenues, you haven't cut taxes enough."

"I favor tax reductions under any circumstances, for any excuse, for any reason, at any time."

"A society that puts equality ahead of freedom will end up with neither equality or freedom."

"Nothing is so permanent as a temporary government program."

"Inflation is taxation without legislation."

"The economy and the stock market are two different things."

"If government is to exercise power, better in the county than in the state, better in the state than in Washington."

"The great advances of civilization, whether in architecture or painting, in science or in literature, in industry or agriculture, have never come from centralized government."

"The minimum wage law is one of the most, if not the most, anti-black laws on the statute books."

"Nobody spends somebody else's money as carefully as he spends his own."

"The government solution to a problem is usually as bad as the problem."

I will miss our lunches and dinners together. He was one of the most unforgettable people I ever met.

P. S.  At our luncheon last month, Milton Friedman and I also talked about the upcoming FreedomFest.  He was a big fan and was looking forward to it. He wrote me this statement to all freedom lovers:  “FreedomFest is a great place to talk, argue, listen, celebrate the triumphs of liberty, assess the dangers to liberty, and provide that eternal vigilance that is the price of liberty. We have so much to celebrate but also much to be concerned about."  We are going to have a special tribute to Milton Friedman at FreedomFest 2007, set for July 5-7, 2007, at Bally's in Las Vegas.  More information here.

[Editor's Note: Dr. Mark Skousen is is a professional economist, financial advisor, university professor and author of more than 20 books. Dr. Skousen has taught economics and finance at Columbia Business School, Barnard College at Columbia University and Rollins College in Winter Park, Florida. He has appeared on ABC News, CNBC Power Lunch, CNN, Fox News, and C-SPAN Book TV.

In 2005, he became the chairman of Investment U, one of the largest investment e-letters in the United States, with more than 300,000 subscribers. http://www.investmentu.com/

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