The man who at the time of his death was the world’s greatest economist had, he told me, got “too damn old” to do much lecturing and had probably written his last book, but his famously sharp and agile mind was still working overtime.

At the time there were worries about whether Japan, mired in a deflationary slump that had lasted more than a decade, would ever pull out of it. But Friedman was unfashionably upbeat about Japan, arguing strongly that the rising sun would shine once again.

Japan, he said, would surprise the world by recovering strongly, on the back of the ultra-low interest rates. It did.

He was similarly upbeat about America, then still groping its way out of the economic uncertainty after September 11. Alan Greenspan was doing the right thing by cutting interest rates to low levels, he said, and the economy would respond to it by bouncing back. Again, he was right.

I first met Friedman, who stood 5 ft tall in his shoes, a quarter of a century earlier. He and his equally diminutive wife Rose, also an economist, were in London to publicise a television series he had made, and which was about to be shown in Britain.

Sitting in a room in a posh London hotel, probably doing their tenth interview of the day, they were animated and interested. The most enduring image of the series was of him standing next to a banknote printing press. The only way to stop inflation was to switch off the press.

Around that time, he also gave evidence to a House of Commons committee. The debate was raging about the Thatcher government’s experiment with monetarism.

Ralph Harris of the Institute of Economic Affairs, who also died recently, had brought Friedman over to London each year during the 1970s, and he was instrumental in persuading Margaret Thatcher and her shadow ministerial team to adopt a policy of beating inflation by controlling the money supply. But Friedman was critical of the approach adopted by the Tories in government. Controlling the money supply, he argued, did not mean crippling the economy with sky-high interest rates.

Friedman, born in 1912 in Brooklyn to poor, first-generation immigrant Jewish parents, became a bogeyman for the left, and not just for his association with Thatcher. He and other University of Chicago economists, who became known as the “Chicago boys”, provided economic policy advice to General Pinochet, the Chilean dictator. Friedman always maintained that he advocated economic freedom as the best way of helping the people of Chile, while never endorsing other aspects of the Pinochet regime. For years, Chile stood out as the sole economic success story in Latin America.

Friedman remained a Chicago boy in spirit, although since 1977 he was attached to the Hoover Institution in San Francisco.

What is less well known is that Friedman was also hugely influential when it came to the economic policy of James Callaghan, Thatcher’s Labour predecessor. Peter Jay, the former Times economics editor, later British ambassador to Washington, was a Friedman follower. The purest expression of Friedman’s economic policy prescription came with Callaghan’s speech to the 1976 Labour party conference, when Britain was mired in the IMF crisis.

You could not, Callaghan warned, “spend your way out of recession”. The option no longer existed and had probably never done so, for it only worked by “injecting inflation into the economy”. The result was: “Higher inflation, followed by higher unemployment. That is the history of the last 20 years.”