In his Newsweek column of 2 February 1970, Milton Friedman enthusiastically applauded the previous week’s appointment of Arthur Burns, his former college professor and mentor, as chairman of the Board of Governors of the Federal Reserve System. He lauded Burns as “the first person ever named Chairman of the Board who has the right qualifications for that post.” Under Burns’s predecessor the U.S. inflation rate had reached 5.5 percent in 1969, having averaged less than 1.5 percent between 1952 and 1965. Friedman’s research had convinced him that inflation – persistently rising money prices of goods on average – was due to overly rapid growth in the stock of money, more and more dollars chasing each bundle of goods. As head of the central bank, Burns would be in a position to control the quantity of money in the American economy. Friedman encouraged Burns to produce growth in the money stock “low enough to avoid renewed inflation.”

In only a few months Friedman had to choose between continuing to express his views honestly and keeping his friendship with Burns unimpaired. As Fed chairman Burns began making public statements attributing inflation not to previous monetary policy, but to “cost-push” factors beyond the central bank’s control. In July 1971 Burns told a congressional hearing: “The rules of economics are not working in quite the way they used to. Despite extensive unemployment in our country, wage rate increases have not moderated. Despite much idle industrial capacity, commodity prices continue to rise rapidly.” He called for federal wage and price controls to fight this supposedly new type of inflation – a policy response that in Friedman’s view was akin to fighting a fever by breaking the thermometer.