[marketcorrection] Don Boudreaux: Inflation Is Always and Everywhere a Monetary Phenomenon

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Posted by Don Boudreaux:
Inflation Is Always and Everywhere a Monetary Phenomenon
http://marketcorrection.powerblogs.com/posts/1175094065.shtml


   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