The Inflation Crisis and How to Resolve It

Saint Milton Friedman taught us that inflation is always and everywhere a monetary phenomenon. A central bank, by printing too much money, can bring about inflation and destroy a currency, all things being equal. But that is the tricky part of that equation, because not all things are equal.

Big Idea Nine: Inflation Is Caused by Increases in the Supply of Money

Inflation is caused by a sustained increase in the supply of money. When people have more money, they spend it, and without an increase in the supply of goods, prices must rise. As Nobel laureate Milton Friedman once wrote: “Inflation is always and everywhere a monetary phenomenon.”

When prices go up because a currency is being debased, that is inflation. It might make a social and political difference if the price increases are in milk and bread, or housing and healthcare, rather than in financial assets, but economically it is irrelevant. It reflects only what the artificial money was first used to buy (also known as the Can