Inflating the Circulating Medium: Cause or Effect?

by Christopher Lingle
The American Institute for Economic Research

Johnny Lee’s apt warning in his hit song “Lookin’ For Love In All The Wrong Places” suggests you cannot find what you seek unless you know what you are looking for and look in the right place. The same might be said about “inflation.” It turns out that too many people are looking for the wrong response to the relentless expansions of money and credit overseen by the Federal Reserve.

In the wake of the ongoing (never ending?) implementation of “unconventional” policies (e.g., ZIRP, NIRP, QE, LSAP, etc), most monetary aggregates have soared to previously unimaginable heights. In turn, those schooled in or influenced by Monetarism, especially if guided by the seminal works of Milton Friedman, are looking for “inflation” as measured as rising price levels as indicated by indices like the CPI or PCE.

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