He thought Dr Davies used the exchange rate to control inflation. He said my belief that Dr Davies has gone the wrong way about monetarism suggests that as long as he takes care of the money supply the rest of the economy will take care of itself. These are matters of prime importance that need further clarification. Perhaps I should begin by pointing out that monetarism is not a philosophy. It is no more than a set of ideas rooted in statistical studies that provide a methodology for improving the effectiveness of market economies.
Monetarists focus on two basic ideas.
They pointed out that many things help to generate inflation, but in the final analysis it will subside if, and only if there is a moderation in the primary cause, namely, the rate of monetary growth. They are right. The best way for controlling inflation is cutting the rate of growth in the money supply. It is fundamental, always works, and therefore does not involve the extravagant claims asserted by Robertson in his letter. I believe that by only looking at the money supply, my article did not do justice to monetarism.