Change Quote by Milton Friedman
“The problem is that, in a world of floating exchange rates, as Italy was before the euro, if one country is subjected to a shock which requires it to cut wages, it cannot do so with a modern kind of control and regulation system. It is much easier to do it by letting the exchange rate change. Only one price has to change, instead of many.”
About This Quote
Source Speech: Economic Policy and Exchange Rates, 1975
Countries with floating exchange rates can adjust via currency value rather than wage cuts, simplifying shock response.
In simple terms: Floating rates let economies adjust without wage cuts.
Key Takeaway
Use exchange flexibility for shocks.
Themes
economics
exchange rates
policy
flexibility
shocks
Mood
analytical
cautious
Type
economic
policy
When to use this quote
- central bank decisions
- fiscal crises
- currency speculation
- labor negotiations
Key Concepts
monetary policy
inflation control
trade balance
Questions to Reflect On
- What are the social costs of currency devaluation?
- How does exchange flexibility affect long‑term growth?
A Different Perspective
May cause inflation or import price spikes.
