But soon the Fed reverted to its usual practice of looking primarily at interest rates in implementing monetary policy. That wasn't necessarily bad. During the 1980s and the early part of the 1990s, money growth didn't predict the economy as well as it had for decades, perhaps because of a banking crisis. Now, says Meltzer, money growth has reasserted itself as a more accurate predictor of the economy. Real money supply, advanced by two quarters, tracks well with real final sales to domestic purchasers, a chart by Mr. Kasriel shows.
Most economists agree that inflation is a result of too much money.
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