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Is inflation always and everywhere a monetary phenomenon? The phrase "inflation is always and everywhere a monetary phenomenon" was first coined by the economist Milton Friedman in 1956. By this he meant that inflation can only be caused by increases in the money supply. If his statement holds true then controlling inflation is possible simply by controlling the money growth rate. Inflation is usually taken to mean a continual increase of the general price level. Typically a small amount of inflation is seen as necessary in order to keep money active in the economy and allow flexibility in the labour market. The answer to the question depends largely on the qualification of the word inflation as Friedman originally meant it. Friedman's argument actually referred to high and persistent levels of inflation. High inflation was and is still seen as a bad thing, and control of it imperative for a successful economy. The...

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