Money Inflation Disconnect

In recent years, Milton Friedman’s comment Inflation is always and everywhere a monetary phenomenon” is proving to be inaccurate at-least for advanced countries. An analysis done by Nishant founder of The middle Road for the tutorial on Money Inflation found little correlation between asset purchases by central bank of Japan, the US and Europe found no evidence of hyperinflation or high inflation due to exponential increase of asset purchases by these respective governments. Recent interview by Paul Krugman confirms the view that inflation at least among advanced countries is no longer a monetary phenomenon.

An increased use of quantitative easing as a vital tool in monetary policy by central banks to boost credit in the markets, is emerging as a clear trend to support stimulus during crisis. As Keynesian thought dominates the markets, at what level of monetary easing is enough remains to be seen.

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