Blog: Monetary Inflation May be Waking Up
As supply side inflation falls, monetary inflation may be rising.
In the Long term Inflation Regimes chapter of the hypertext book I describe the three sources of inflation:
- Increases in demand,
- Decreases in supply, and
- Increases in the money supply.
Because of Milton Friedman's statement in the 1980s that "Inflation is everywhere a monetary problem," many simplistically attribute all inflation to the money supply. The 1970s high inflation, which was a monetary phenomena, remains seared into the public consciousness. Unfortunately, many attribute the current inflation regime to money supply issues because what else can it be? While money supply has been rising, the current inflation has primarily been a supply shortage issue, with demand staying high due to fiscal stimulus. But that may be changing, and that's not a good thing.