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ART LAFFER: I Was Wrong About Inflation And The Fed

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CrowEpistemologist

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From the article (emphasis mine):

 

"Usually when you find the model this far off, you've probably got something wrong with the model, not that the world has changed," he said. "Inflation does not appear to be monetary base driven," he said."

 

Well well now. Welcome back to Earth, Art.

 

Hopefully more Republican thinkers will follow him and drop the "runaway inflation" scare tactics, and maybe foster a new direction for that Party that's based on evidence and reason. Maybe. Here's to hoping.

 

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To the OP, do I gather you disagree that inflation is driven by monetary policy? Is there an alternate theory that you subscribe to?

 

It isn't only the quantity of money; it's also the velocity of money.

http://finance.yahoo.com/news/velocity-money-elephant-room-180802951.html

The graph missing from that page is here:

http://research.stlouisfed.org/fred2/graph/?id=M2V

You can change the date range if you want.

 

The velocity of money will rise when banks start lending more. Banks are the "engines" of inflation. The Fed controls the "gas tank."

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It isn't only the quantity of money; it's also the velocity of money.

Sure, it's a multi-variable problem; I was simply prompting Crow to tell us what he thinks. There isn't much to Laffer's linked comments, he's now admitting a prediction he made in 2009 was wrong, one made while the egg on his face was still fresh...who cares?
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