Take a five-dollar bill out of your wallet. Now cut a rectangle of the same size from a glossy magazine. Both are pieces of paper. Both have pictures and numbers on them. One can buy you lunch. The other is garbage. Why? That question – why green paper has value – is where the Friedmans begin their chapter on inflation. And the answer is stranger than you might think.
This is the final post in a 14-part series on Trading Economics: A Guide to Economic Statistics for Practitioners & Students by Trevor Williams and Victoria Turton (Wiley Finance, 2014, ISBN: 978-1-118-76641-5).
The 2008 financial crisis broke a lot of things. Banks failed. Markets crashed. Millions lost their jobs.
But it also broke something less obvious: the idea that light-touch regulation was good enough to keep the financial system safe.
This is post 9 in a series on Trading Economics: A Guide to Economic Statistics for Practitioners & Students by Trevor Williams and Victoria Turton (Wiley Finance, 2014, ISBN: 978-1-118-76641-5).
Milton Friedman once said: “Inflation is always and everywhere a monetary phenomenon.”
That’s one of the most quoted lines in all of economics. And it’s a great starting point for understanding what inflation actually is, where it comes from, and why it matters so much.
Book: Financial Markets and Institutions, 11th Edition Author: Jeff Madura Publisher: Cengage Learning, 2015 ISBN: 978-1-133-94788-2
Chapter 4 explained how the Fed is set up and what tools it uses. Chapter 5 goes deeper into how those tools actually affect the economy. This is where it all comes together: money supply changes flow through to interest rates, which affect borrowing, which affects spending, which affects jobs and prices.