Government Spending and Inflation. Part 1, Expanded

“Inflation is always and everywhere a monetary phenomenon.”
.    – – Milton Friedman1

Nobel laureate Milton Friedman is considered to be the father of monetarism. This macroeconomic theory enjoyed popularity in the late 20th century but has come under increased criticism in the 21st century.  Monetary theory is deeply linked to arguments about the causes of inflation.  As shown here, there is little data to support Friedman’s theory that government spending generally causes inflation.  The issue is not as simple as he made it seem.


Milton Friedman, age 77, 1989.  Credit: Encyclopedia Britannica.