The King Canute theory of inflation

BloombergOpinion/Mervyn King/11-23-2021

engraving from mid-19th century of Canute ordering waves to recede

“This is the King Canute theory of inflation. A thousand years ago, according to legend, King Canute of England set his throne on the shore and commanded the incoming tide to halt. The tide paid no attention. It continued to rise and dashed over his feet and legs, driven by the laws of nature. A satisfactory theory of inflation cannot take the form, ‘Inflation will remain low just because we say it will.'”

USAGOLD note: Mervyn King formerly headed up the Bank of England. He says that the old Friemanite notion that inflation is simply “too much money chasing too few goods” is the correct one and that basing policy on expectations, which is what the Federal Reserve is now doing, does not work.

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