By John Tamny of Forbes
Money creation isn’t the driver of economic energy as quantity theorists presume, instead it increases when money values are stable, trade free, and taxes/regulations light. Production itself is the driver of increases in the supply of money, and that’s why it rose substantially during the ’20s, ’80s and ’90s, and fell during the ’30s and more recently. The growing deflation cult sees a decline in the Ms as a signal of the Fed not creating enough money, but the aggregate declines, far from a deflation signal, are a sign that policy (including the Obama administration’s weak dollar policy) is presently a barrier to production, and “money supply” is predictably in decline. The deflationists are confusing symptoms of inflation for deflation, and as weak global currencies all reveal, we’re nowhere near deflation.
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