“What they don’t talk about and what they forget – and what we learned in the 1970s – is that inflation is a monetary phenomenon,” he said. “Go back to February 2020, the Federal Reserve has increased the M2 money supply by 30% from then until now. That’s a 30 percent increase in the amount of money in the economy and by definition it means that the value of the dollar in relation to goods and services will decrease. “
Explaining the basic principles of inflation, Wesbury said that an increase in money supply increases prices, which are then further increased by supply problems. When supply problems normalize again, prices will fall, but the increase to increase the money supply will persist. This, he argued, was the definition of inflation.
He also dismissed believers in Modern Monetary Theory – that more money in the economy will spur the production of more goods and services – saying that their attitude was “bullshit” and that the idea of increasing the deficit without negative effects was a pipe dream be.
He said, “There is never any work in history; it won’t work now. Yes, there are supply chain issues, there is a small base effect, but the inflation we are seeing comes because we increased the money supply by 30%. It’s here to stay Eventually, all prices will increase by an average of 30%. I don’t know if this will take two years, four years, six years – inflation could be 5% a year for six years and that’s 30%.
“We haven’t increased the money supply like this, at least since the early 1940s during World War II. Even in the 1960s and 1970s, we never increased the money supply by 30% in a year. That’s where inflation comes from. And that’s why it is not perishable. “