Milton Friedman famously taught that “Inflation is everywhere and always a monetary phenomenon.” Simple yet profound.
I put that quote in my bag of fundamentals the day I first heard it. I carry that bag with me to every problem I visit. It’s like the little black bag that the doctors used to carry with them in times past to address simple health problems. I use mine to address my own simple mind when things become too complicated for me. I have to rummage through it a lot for obvious reasons.
I should carry another bag with me, too. You know, the kind people carry to clean up after their dogs when walking them. I would use it to put quotes by Robert Reich and Paul Krugman in. The bag ends up the same place as the “doggie bag” and smells about the same. But I digress.
Keeping Friedman’s observation in mind as the we ponder the recently discovered US inflation problem might be a good strategy.
Economist and writer Jon Miltimore dropped a fact bomb on me today as I watched him being interviewed by another smart economist and writer, Matt Kibbe. That bomb is of the “bunker buster” size and will rock even my friends who have taken my oft given advice to “get a helmet.”
The fact bomb he dropped was that “35% of all the US dollars in circulation have been “printed” in the last 18 months.” My new advice is, It’s time to put the damn helmet on.
So my question to anyone who takes the time to ponder that fact is: If the inflation is being caused by the FED printing all those trillions of dollars so that politicians can dump them into the bag carried by their sponsors, does it make sense to print another two or three trillion more and dump that in their bag as well?
Would you do that to fix the problem? I wouldn’t. Neither would Friedman. But politicians from the Democrat and Republican parties would.
And you’ll pay for it with money you could be using to buy a bigger helmet.
The sky IS falling.