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Do High Interest Rates Fix High Inflation?
In prior articles and newsletters, I’ve explored the causes of price inflation over time. In short, the rate of price inflation in an economy comes from a combination of 1) money supply growth and 2) significant changes in productivity and/or resource abundance. -Periods of fast bank lending or large monetized fiscal deficits (and thus rapid money supply growth) tend to create inflationary environments, while periods of fiscal austerity and/or private sector deleveraging events (and thus slow money supply growth or outright money supply contraction) tend to create disinflationary or outright deflationary ... (full story)