Paul Krugman is terrified by the “paleomonetarist” thinking of Ron Paul, the incoming hed of the House Fed oversight committee.
Specifically, he’s appalled by Paul’s thinking in regards to the monetary base and its effect on inflation:
If you read his stuff, it’s very clear: money is a well-defined quantity that the Fed controls, and inflation comes from — indeed is defined as — increases in that quantity.
What he means, I guess, is monetary base. Here’s the actual relationship between monetary base and inflation:
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