Inflation is blamed on many things but it has only one cause. It is a monetary phenomenon. Inflation occurs when the quantity of money increases faster than the quantity of goods. Why does the money supply increase? Very often it does so to enable the government to pay its bills without raising taxes. There’s only one real cure for inflation. It is a cure that’s easy to describe but difficult to apply. The government must reduce spending and print less money. The alternatives are both recession and double-digit inflation.
In Milton Friedman’s own words, “Inflation is a disease. It’s a dangerous disease for a society. It is sometimes a fatal disease for a society. It’s a disease that if allowed to rage unchecked can destroy a society, and we have many such examples…it behooves us as a nation to pay attention to this disease, to ask ourselves what is the cause of the disease, how do you cure the disease, what are the effects of the cure, what are the side effects of it, and what will happen if we don’t cure it?”
So, what is the solution? Hear Milton’s take on the problem in the podcast, Milton Friedman Speaks – Money and Inflation.