Inflation: Making the Complex Simple Part 2
Click HERE for Part 1 of this article.
Before progressing, it is worth revisiting Stoking The Embers of Inflation, a paper we wrote with Brett Freeze in 2018. At that time, the money supply was declining, and we argued, contrary to popular thinking, it might generate more inflation. In the months that followed, annual CPI rose to 2.90%, the highest level since 2012. Today, we argue a sharply rising money supply may not generate much inflation.
In Part 1 we wrote: “The truth lies in the supply and the demand for money. Unfortunately, the supply of money gets the headlines, while its demand is an afterthought.”
This article’s underlying theme, and the one described in depth in the article mentioned above, is the Monetary