Higher interest rates increase both the monetary supply and inflation

It takes a lot of motivated reasoning to believe otherwise.

Next week (Feb 8–17), I’ll be in Australia, touring my book Chokepoint Capitalism with my co-author, Rebecca Giblin. We’ll be in Brisbane on Feb 8, and then we’re doing a remote event for NZ on Feb 9. Next is Melbourne, Sydney and Canberra. I hope to see you!

https://chokepointcapitalism.com/

Here’s the theory: first, hike interest rates, which makes borrowing more expensive and reduces the supply of money in circulation. With less borrowing, there’s less expansion, which leads to layoffs that lower the spending power of workers, which means that there are fewer dollars chasing the same goods, which means that prices go down. Q.E.D.

This orthodoxy comes to us from Milton Friedman, the father of neoliberal economics, who believed that every economic problem was down to a mismanagement of the money supply. As economist Robert Solow quipped: “Everything reminds Milton of the money supply. Well, everything reminds me of sex, but I keep it out of the paper.”

https://www.nybooks.com/articles/2007/02/15/who-was-milton-friedman/

Friedman’s orthodoxy — monetarism — has reigned supreme for decades, which is…