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Alasdair Macleod: Understanding the inflation problem
By Alasdair Macleod
GoldMoney, Toronto
Thursday, January 20, 2022
In recent weeks inflation has become a major economic concern. Nearly all the commentary emanating from monetary policy makers, economists, and the media is misguided, believing inflation is rising prices and must be addressed accordingly.
They are only the symptoms of inflation. The true cause is the expansion of currency and bank credit, which, reflected in the U.S .dollar's M2 money supply has increased substantially since March 2020, and now stands at nearly three times the level when Lehman failed.
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After defining the differences between money, currency, and credit that together make up the media of exchange, this article explains how changes in the quantities of currency and credit translate into prices.
The solution to the inflation problem is not price controls, which are always counterproductive, but to return to a regime of sound money. This article shows what must be done to achieve this outcome and concludes that it is impossible to do so without a sufficiently serious financial and economic crisis to discredit government intervention in markets and to then allow governments to stabilise their currencies and reduce their spending to a bare minimum. ...
... For the remainder of the analysis:
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