Table of Contents The Fault Lines of Monetarism . The Death of Inflation by Roger Bootle. Both of these positions are riddled with dogma. Neither finds room for historical and institutional factors.
Monetarism is just such a temptation, and economists have fallen for it.
It provides a link with monetary inflations of the past, and with more recent hyperinflations that always involve massive printing of money. There is no doubt that monetary expansion plays a dominant role in hyperinflation. Yet Philip Cagan found in a classic study of seven hyperinflations that in all cases there were substantial declines in the demand for money in real terms, such that the rise in prices substantially exceeded the rise in the money supply. The Causes of Hyperinflation To the monetarist, creeping inflations are really the same as hyperinflations, differing only in degree. But underlying hyperinflation is almost always a huge budget deficit which the government is unwilling or unable to finance in the ordinary way by borrowing in the capital markets.