Saturday 22 July 2023

INFLATION: If we misuse the term to mean rising prices then we misunderstand its cause




"Inflation is an increase in the quantity of money and credit. Its chief consequence is soaring prices. Therefore inflation—if we misuse the term to mean the rising prices themselves—is caused solely by printing more money. For this the government’s monetary policies are entirely responsible. (emphasis added)
        ~ Henry Hazlitt, from his essay 'Inflation in One Page'

"Before World War II, when the terms 'inflation' and 'deflation' were used in academic discourse or everyday speech, they generally meant an increase or a decrease in the stock of money, respectively. A general rise in prices was viewed as one of several consequences of inflation of the money supply; likewise, a decline in overall prices was viewed as one consequence of deflation of the money supply. Under the influence of the Keynesian Revolution of the mid-1930s, however, the meanings of these terms began to change radically. By the 1950s, the definition of inflation as a general rise in prices and of deflation as a general fall in prices became firmly entrenched in academic writings and popular speech. (emphasis added)
        ~ Joseph Salerno, from his book Money: Sound and Unsound (p.297)

Hat tip Joshua Mawhorter, from his article 'Taking Back the Meaning of Inflation'

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