Investing - Theory, News & General • Inflation of Stock Prices Themselves

There really isn't any strong correlation between the Fed control of M0 and inflation. There is also no strong correlation between the money supply and inflation.

I don't think this is accurate at all.

But it is, in fact, a statement of fact.

See Goodhart's law, above -- technically it's an observation. Basically if a Central Bank tries to control a monetary aggregate, that has had a high correlation in the past with inflation, then that aggregate loses any predictive power for inflation.

Central Banks target inflation directly, Monetarism is dead in that sense.

The reasons being:

- the modern financial system can innovate into new forms of money that are not directly controlled by the Central Bank

- Central Banks can't control monetary velocity. It is the rate of circulation of money that is the big factor - and highly volatile

Statistics: Posted by Valuethinker — Thu Jan 08, 2026 9:10 am — Replies 37 — Views 2320

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