The Quantity Theory of Money: A New Restatement

As Covid-19 hit the world’s leading economies, most economists – in central banks and elsewhere – expected years of disinflation or even falling prices. To counter the supposed risks, policy-makers embarked on expansionary measures which caused money growth to reach remarkably high rates in spring and summer of 2020. In the event inflation soared in the next few quarters. In 2022 it reached the highest levels for 40 years in the USA, Europe, the UK and elsewhere. In this bold new book Congdon laments the widespread forecasting failure.

From the very start – in late March 2020 – he warned both that rapid money growth was to be expected and that it would lead to a serious inflation flare-up. In rigorous but accessible language, Congdon explains the continuing analytical power of the quantity theory of money. As with other inflation episodes in the past, the inflation of the early 2020s demonstrated the force of Milton Friedman’s dictum that ‘inflation is always and everywhere a monetary phenomenon’.