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Revenge of the Monetarists

There is enduring truth in monetarism, famously summed up by Milton Friedman with the contention that inflation is always and everywhere a monetary issue. Money supply, more than anything else, in other words, drives prices. 

The British economist Tim Congdon, best known as one of the intellectual parents of “Thatcherite” economics in the 1980s, is confident that he is in the process of being proved correct.

10-year Treasury yield briefly topped 3% for the first time since late 2018.

 The yield on 10-year Treasury Inflation-Protected securities, or TIPS, is positive again. After its longest ever stay in negative territory, the “real” post-inflation rate at which to borrow or lend money over 10 years is now higher than at the beginning of the pandemic. 

This startling surge has brought to an end another element of the monetary desperation tactics that followed the lockdowns of March 2020

A further factor is QT’s effect on collateral, or on the ability to roll over or refinance investments. It will leave less cash in markets, and make it harder to find collateral when it is needed. 

John Authers Bloomberg 3 maj 2022 


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