Cancel Milton Friedman, and Inflation Is What You Get

The word ‘money’ doesn’t even appear in President Biden’s plan to whip inflation

Letter to WSJ.

"The lead paragraph of President Biden’s op-ed “My Plan for Fighting Inflation” (May 31) asserts that the global economy faces an inflation problem exacerbated by Vladimir Putin’s war in Ukraine, high oil prices and supply-chain problems. This line of argument shows why the president’s team and the experts at the Federal Reserve were unable to anticipate the inflation conundrum that their economic missteps have forced us into. It also shows why the president’s plan will likely fail to allow us to exit inflation with a smooth landing.

We don’t have a global inflation problem. Inflations are always and everywhere a monetary phenomenon spawned by the creation of excess money by local central banks. China, Japan and Switzerland also face elevated oil prices, supply-chain problems and fallout from the war in Ukraine, but their annual inflation rates are 2.1%, 2.5% and 2.5%, respectively. They have avoided the ravages of inflation because their central banks haven’t produced excessive quantities of money.

Adherence to the tenets of monetarism is nowhere to be found in the Biden White House or the Fed. Chairman Jerome Powell has stressed that we had to “unlearn” monetarism. It looks like Mr. Biden was an attentive student. The word “money” doesn’t even appear in his plan to whip inflation. As he said in 2020, “Milton Friedman isn’t running the show anymore.” As long as Friedman and monetarism remain canceled, the White House and the Fed will be grasping for straws.

Prof. Steve Hanke and John Greenwood

Johns Hopkins University

Baltimore and London"