Monday, January 24, 2022

My letter to the NY Times re: The link between higher prices and the quantity of money

 From: Patrick Barron

Sent: Monday, January 24, 2022 11:38 AMTo: NY Times <letters@nytimes.com>Subject: The quantity theory of money and higher prices
Kudos to the NY Times for finally connecting the dots on higher prices and inflation of the money supply. Questioning whether inflation of the money supply just might contribute to higher prices is like asking whether over eating just might contribute to obesity. But, at least the NY Times is giving credence to the topic. One of the foundations of monetary theory is The Quantity Theory of Money. Most economists no longer claim a direct and immediate link between prices and the money supply, but acknowledge that over time demand for holding the additional supply of money will wane and will work its way into demand for goods and services, resulting in higher prices. Yet there is an equally erroneous concept at work; i.e., that increasing demand for goods via money printing is good for the economy if done in modest tranches. More money does not, somehow, bring more goods out of hiding, so to speak. More money changes the structure of production away from producer goods to consumer goods. It is as if one decided to spend one's retirement savings on current consumption. The mainstream economists would rejoice that spending had increased. But what about one's retirement nest egg? One's future would look rather bleak.
Patrick Barron
20 McMullan Farm Lane
West Chester, PA 19382
Phone: 610-793-3605

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