Inflation in the United States was over 7 percent in 2021. This is dramatically higher than just a couple of years ago when it was less than 2 percent per year.
Why did it go up? The most obvious answer – and the one consistent with an extraordinarily large amount of evidence – is the dramatic increase in the quantity of money in the economy. Effectively, this increase is similar to Milton Friedman’s hypothetical helicopter drop, in which money rains down from the skies, people pick it up and they spend it over time. The federal government’s stimulus payments, financed by increased government debt purchased by the Fed, were deposited directly into people’s accounts, eliminating the effort of picking up the money.
Source:
AIER
