“Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”
Milton Friedman’s statement from 1970 should not be controversial; if the amount of money goes up faster than the amount of stuff available to buy, then the inevitable result is higher prices.
Yet, to read recent discussions, one would be excused for thinking there is some great mystery surrounding the reason for inflation. I don’t think I have ever seen such a relatively simple issue clouded in so much confusion. The Federal Reserve, unfortunately, has worsened these misconceptions by misrepresenting the relationship between the money supply and overall economic well-being.
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