The Quantity Theory of Money states:
M * V = P * Q
where:
M = the money supply (think of M2)
V = the velocity of money
P = Prices (index like CPI)
Q = Output, or things produced
V has been almost constant for 5 decades. If there’s no inflation, then P should be constant. Given that, if productivity (Q) increases by 3.2% per year, then M should increase by a proportional amount.
If you look at the measure of M2 for the last six decades, it has been very stable.
https://www.reuters.com/markets/funds/us-money-supply-falling-fastest-rate-since-1930s-2023-03-29/
Now look what happened after Joe was elected. Never before have we ever seen such a mismanagement of M2...more that 5x the secular trend. If Dufus knew anything about economics, he would see that, with Q stagnate, P could only increase. Couple that with the explosive growth in M2, inflation had to be the result.
We should require politicians to take Econ 101...and pass.
econ,
Thanks.
Good article.