INFLATION: MISES & FRIEDMAN WERE AS WRONG AS THEY COULD BE

Milton Friedman’s statement “Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output” typifies the libertarian approach to money.

And, of course, governments spend too much of our money.

They’re incorrect.

‘Libertarians’ have little to say about private banks creating 95% of all money – at impossibly compounding rates of interest. It’s just “governments printing too much money”.

Nor, instead of national governments actually borrowing from private banks via bonds to finanance deficits, do they hold that government should be financing deficit budgets with its own money – our currency – interest-free?

No, they’re terribly fussed about this particular type of ‘debt’.

Libertarians don’t like taxes; but do they see that they are passed on into prices, along with interest and land prices? Nup, there’s the real underlying inflation devaluing our money, boyos!

That real but apparently invisible cost-push inflation is why we are condemned to the repetitive land price cycle whose bubbles burst into recession every 18 years – to resolve themselves in the absence of political action.

But who’s concerned about this aspect of inflation? Very few!

Not ‘libertarians’. Not neoclassical economists (see Ross Gittens in The Age today: “Have a moan about inflation, but just don’t mention profits“).

Nobody – except a few supporters of the ideas of Henry George, a few modern monetary theorists and some universal income people.