Inflation Is Always and Everywhere a Monetary Phenomenon
16 June 2006
The Editor, New York Times
229 West 43rd St.
New York, NY 10036
To the Editor:
Paul Krugman relies on the discredited "cost-push" theory to explain inflation ("The Phantom Menace," June 16). As Milton Friedman and others have shown, inflation is caused by excessive growth in the money supply, not by rising prices or "embedded" pressures. Krugman himself can't escape this truth: he admits that the 1970s' inflation was tamed only when the Fed cut money-supply growth.
If inflation is rising today - if wages and prices are "leapfrogging" - it's because the money supply is growing too rapidly. And the only way to halt inflation is for the Fed to disregard Krugman's advice and further reduce its rate of pumping dollars into the economy.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
The Editor, New York Times
229 West 43rd St.
New York, NY 10036
To the Editor:
Paul Krugman relies on the discredited "cost-push" theory to explain inflation ("The Phantom Menace," June 16). As Milton Friedman and others have shown, inflation is caused by excessive growth in the money supply, not by rising prices or "embedded" pressures. Krugman himself can't escape this truth: he admits that the 1970s' inflation was tamed only when the Fed cut money-supply growth.
If inflation is rising today - if wages and prices are "leapfrogging" - it's because the money supply is growing too rapidly. And the only way to halt inflation is for the Fed to disregard Krugman's advice and further reduce its rate of pumping dollars into the economy.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Posted by Don Boudreaux on
Wednesday March 28, 2007 at 11:01am