Richardcyoung.com

  • Home
  • Debbie Young
  • Jimmy Buffett
  • Key West
  • Your Survival Guy
  • How We Are Different
  • Paris
  • About Us
    • Foundation Principles
    • Contributors
  • Investing
    • You’ve Read The Last Issue of Intelligence Report, Now What?
  • The Swiss Way
  • My Rifles
  • Dividends and Compounding
  • Your Security
  • Dick Young
  • Dick’s R&B Top 100
  • Liberty & Freedom Map
  • Bank Credit & Money
  • Your Survival Guy’s Super States
  • NNT & Cholesterol
  • Your Health
  • Ron Paul
  • US Treasury Yield Curve: My Favorite Investor Tool
  • Anti-Gun Control
  • Anti-Digital Currency
  • Joel Salatin & Alfie Oakes
  • World Gold Mine Production
  • Fidelity & Wellington Since 1971
  • Hillsdale College
  • Babson College
  • Contact Us

Freidman: Inflation Is a Monetary Phenom

July 21, 2021 By Debbie Young

FOMC Chairman Powell answers a reporter’s question at the October 30, 2019 press conference.

“Inflation is always and everywhere a monetary phenomenon.” (Milton Friedman)

M2 Not Important?

Growth in the money supply, specifically M2, “doesn’t really have important implications.” (Fed Chairman Jerome Powell 23 Feb testimony to Congress)

June’s inflation index jumped 5.4% from a year ago, the highest reading since August 2008, which surprised the experts, writes the WSJ.

The Fed in Its Ivory Tower

But Chairman Powell, who is neither a banker nor an economist, and his cohorts should start paying attention to the money supply. Money not only matters, it dominates.

Americans are repeatedly told that the most recent upticks in inflation are anomalous and “transitory.”

“Wrong,” argues the WSJ.

The inflation upticks aren’t temporary and were predictable, driven by an extraordinary explosion in the money supply. Since March 2020, the M2 has been growing at an average annualized rate of 23.9%—the fastest since World War II.

There is so much money out there that banks don’t know what to do with it. Via reverse repurchase agreements, banks and money-market funds are lending money to the Fed to the tune of $860 billion. That’s unprecedented.

Milton Friedman’s Model

… consider a monetarist compact model for determining national income. That famous model was displayed on Milton Friedman’s California license plates. It’s compact:

  • MV=PY, where M is the money supply,
  • V is the velocity of money (the speed at which it circulates)
  • P is the price level
  • Y is real gross domestic product

Inflation Baked Into the Cake

Plug numbers into the model and solve for M, and money supply (M2) should be growing at around 6% a year for the Fed to hit its inflation target of 2%. With M2 growing at nearly four times the “ideal” rate since March 2020, inflation is baked into the cake, and it’s likely to persist.

By the end of the year, the year-over-year inflation rate will be at least 6% and possibly as high as 9%.

Some who like to throw cold water on monetarism argue that the velocity of money has collapsed and will mitigate the inflationary impact of the rapid growth of the money supply.

Velocity did collapse with the onset of COVID. Velocity, however, is on track to pick up until the end of 2024. Consequently, velocity will grease the monetary wheels. That’s why inflation might hit the high end of our forecast range.

If you’re willing to fight for Main Street America, click here to sign up for the Richardcyoung.com free weekly email.

Related Posts

  • A Recipe for Inflation Shock
  • Here Comes Inflation
  • American Reality? The Looming Acceleration of Inflation
  • Who Says There’s no Inflation?
  • Author
  • Recent Posts
Debbie Young
Debbie Young
Debbie, our chief political writer of Richardcyoung.com, is also our chief domestic affairs writer, a contributing writer on Eastern Europe and Paris and Burgundy, France. She has been associate editor of Dick Young’s investment strategy reports for over five decades. Debbie lives in Key West, Florida, and Newport, Rhode Island, and travels extensively in Paris and Burgundy, France, cooking on her AGA Cooker, driving through Vermont and Maine, and practicing yoga. Debbie has completed the 200-hour Krama Yoga teacher training program taught by Master Instructor Ruslan Kleytman. Debbie is a strong supporting member of the NRA.
Debbie Young
Latest posts by Debbie Young (see all)
  • Just Don’t Call It “Obliterated” - July 1, 2025
  • The Ugliness of Political Warfare - June 30, 2025
  • Money for Nothing - June 27, 2025

Dick Young’s Must Reads

  • DEATH SPIRAL: Crime Soars in Democrats’ #DEFUNDTHEPOLICE Cities
  • “The Great Object Is that Every Man Be Armed”
  • DIGITAL ID: You Are More than a Soulless Digital Identity
  • Will Government Spending Spur Hyperinflation?
  • BLOOD THINNERS: Is a Big Advance Imminent?
  • The Masters of the Universe Align Themselves with CHINA Using YOUR Money?
  • California’s Progressive Liberals Have Created a Monster
  • Richard Feynman Solved the Space Shuttle Disaster Mystery
  • Feds Raid America’s Number One Patriot: Naples Florida’s Alfie Oakes
  • Tom Brady Is Proof You Shouldn’t Retire if You Still Love Your Work

Our Most Popular Posts

  • Donald Trump’s “Faithful Execution of Law”
  • Iran’s Lost Advantage
  • How Was the Trip?
  • “Off the Table”
  • Democrat Party Blinded by Hate
  • RIP Fred Smith
  • Smartphone Satellite Communications Are Here
  • Every Family Should Own at Least One Shotgun: Here Are Three
  • Money for Nothing
  • Two and Half Days to a Bomb?

Compensation was paid to utilize rankings. Click here to read full disclosure.

RSS Youngresearch.com

  • Survive and Thrive June 2025: The Lay of the Land: Who Can You Trust?
  • Job Market Remains Strong
  • Chinese Goods Price Increases Outpace Core Inflation
  • From Scroll to Store: How Social Media Is Powering Retail Traffic in 2025
  • Work to Retirement #11: Whatcha Gonna Do?
  • Canada Rescinds Tech Tax, Resumes Trade Talks with U.S.
  • US Investment Gap Narrows in Q1
  • Why the ‘Big Beautiful Bill’ Could Fix America’s Broken Grid
  • Smartphone Satellite Communications Are Here
  • Income Falls as Government Cuts Welfare Spending

RSS Yoursurvivalguy.com

  • Survive and Thrive June 2025: The Lay of the Land: Who Can You Trust?
  • Dividends: “Because It Works”
  • “Surrounded by an Armed Country”
  • Every Family Should Own at Least One Shotgun: Here Are Three
  • What’s the Best Gun for Home Defense?
  • Work to Retirement #11: Whatcha Gonna Do?
  • Smartphone Satellite Communications Are Here
  • What’s Your Backup Internet Plan?
  • How Does Internet from Space Work?
  • Stein Vetoes NC’s Constitutional Carry Bill

US Treasury Yield Curve: My Favorite Investor Tool

My Key West Garden Office

Your Retirement Life: Traveling the Efficient Frontier

Live a Long Life

Your Survival Guy’s Mt. Rushmore of Investing Legends

“Then One Day the Grandfather was Gone”

Copyright © 2025 | Terms & Conditions | About Us | Dick Young | Archives