I enjoy Milton Friedman a lot. I often disagree with him, but more because he tends to project his conclusions to extremes than because of fundamental flaws in his analyses. Estimating what will happen in extreme situations is an arena where normal economic analysis typically fails since historic data do not provide enough examples to permit reasonable assessment.
Friedman, in my mind, represents the best of what the Republican Party used to champion, before it decided to ally itself with the religious right and companies seeking government protection for their market positions. He believed strongly, as I do, in the power of a competitive market place and viewed government intervention as more likely to cause problems than to solve them. However, he still recognized and promoted the government's necessary role in preserving an environment in which competition can thrive. That includes control of the monetary system, provision of truly public goods, regulation in cases of monopolies, and intervention to diminish "neighborhood effects" that do not get priced properly into economic decisions (e.g., pollution). He was an early supporter of the Negative Income Tax and possibly a primary reason why this was implemented under Nixon and expanded under Reagan in the form of "tax credits" paid to people in excess of their actual tax payments.
While conservatives love to claim Friedman as their own, they forget that he was, in his own words, a "liberal". He was an agnostic. He believed that one of the major threats to reducing the role of government was the "notion that the U.S. has a mission to promote democracy around the world." He viewed war as a friend of big government because it provides the state with an opportunity to seize freedoms and expand budgets. He believed that the best situation in Washington was a divided government with one party controlling the white house and the other controlling congress. "There were no big spending programs during the Clinton administration," he said. "As a result, government spending tended to stay down, the economy grew like mad, taxes went up, spending did not, and lo and behold, the deficit was turned into a surplus." This he viewed as a positive, in contrast to the sitution post Clinton where single party control produced rapid growth in spending, tax cuts, and a burgeoning deficit. He believed in concrete limits on intellectual property rights because they foster monopoly pricing. Finally, he was always clear that while economic capitalism was essential to freedom, it was no guarantee of freedom. He tended to favor an approach to the involvement of government in regulating political and social behavior as minimalist as the role he recommended in economics.
Our monetary system and economy is basically a faith based institution. We have faith a dollar has value, faith in our food supply, faith in our water supply, and on and on. Faith in financial instruments(bundled mortgages) has already gone and faith in the banks is crumbling which rely on those instruments. Soon inflation will cause a loss of faith in our dollar.
If we have an economic cold, the rest of the world has economic pneumonia. Worldwide economic and political instability is on the horizon, which makes fertile ground for wars.