5 Comments

What do you think we should do to control inflation, if not increase interest rates?

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Fixing the broken supply chains which are the cause of the inflation would be a good start.

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I agree that supply chains are a factor, and that they were broken by various government policies, but I don't see that as the root cause.

You don't see inflation as a monetary effect, from the government creating 2+ trillion dollars?

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The timelines don't line up.

I'm very familiar with monetarist theories on inflation, but when you look at the expansion of the money supply, the majority of it occurred in Q1 2020. M1 velocity dropped at the same time, and has not picked up.

The inflation didn't pick up steam until 2021.

Inflation requires money supply AND money velocity. Right now we have the one and not the other.

Moreover, while m1 money supply, m1 velocity, and consumer price inflation per the CPI all historically grow in tandem, that correlation fractured in 2008 and has not been restored.

All of which makes reflex Friedmanite monetarist reactions to inflation dangerous oversimplifications.

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Thanks, very helpful.

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