The Public Interest

Inflation and the American economy

Martin S. Feldstein

Spring 1982

How did the recent high rates of inflation originate? And can an understanding of these origins help to reduce the current rate of inflation or to prevent another round of increases in the future? For monetarists, a search for the origins of inflation is very uninteresting.  As Milton Friedman once said, “Inflation is always and everywhere a monetary phenonomen.” Such a statement is both true and uninformative. It is true because a sustained increase in prices cannot occur without an increase in money. But it is uninformative because it fails to explain why the monetary authorities have allowed a sustained monetary increase.

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