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It is worth noting that in (the crazy cult of) Austrian economics, inflation is defined as increasing the money supply. This sometimes makes discussions with them difficult, since for rest of the world (all serious economists) inflation means increasing prices


The Austrians are 'crazy' when they inexorably link inflation to the supply of money growing faster than the demand for money, but when someone quotes Friedman on inflation, to wit: "Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output," heads nod, and no one calls anyone crazy.

The difference between the two views is little more than semantics.

You don't understand how Austrians define inflation. If they had said it's "the supply of money growing faster than the demand for money" we wouldn't have an argument (oh, we would, but not over the definition of inflation) They claim it is the increase in money supply that is inflation. They don't care about prices. Also - Friedman (with his famous VM = PY ) obviously acknowledged the importance of demand for money affecting prices)

Both the Austrians and Friedman overestimated the role monetary policy can play. We've had a huge increase in the monetary base, but no price inflation since 2008. Austrians and to some extent Chicago-economists have predicted runaway inflation, and ended up with egg on their faces. But self criticism is of course nowhere to be seen as usual.

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