This follows reading Paul Krugman’s recent post. I wasn’t there. Too young, and never in America. But, nevertheless, I’ll sketch my own version of what ‘monetarism’ means to me.
- The belief that monetary policy mistakes were behind the business cycle – illustrated by Friedman and Schwartz’ chartism concluding that the Great Depression was caused by too-tight monetary policy. They were probably right about this, and this is one bit of ‘monetarism’ that has proved enduring and useful.
- A focus on the bookkeeping identity of monetary policy PT=MV. This was helpful during the years when policymakers thought that inflation was a ‘cost’ phenomenon to be tackled with prices and incomes policy. This idea also endures.
- The unfortunate idea that it follows from PT=MV that central banks could use money targets to deliver desired changes in P. These targets were ditched as it was realised, through difficult experience, that money demand…
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Utopia, you are standing in it! 
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