The author defends the Austrian definition of inflation as an increase in the money supply (dilution of the currency) rather than the statistical measure of rising prices that depends on output growth.

Critiquing Lance Roberts, the piece argues that true economic analysis focuses on causal relationships (ceteris paribus) rather than imperfect statistical metrics used by policymakers and investors.

Milton Friedman’s famous quote is said to mix the economic concept of inflation with a statistical outcome, illustrating how reliance on measures can distort understanding of monetary phenomena.

In a recent column for Seeking Alpha, investor-turned-analyst Lance Roberts defends Milton Friedman’s view of inflation against what he calls inflation “doomers” and Austrians. By the former, he means those who approvingly lean on the Friedman quote that, “Inflation is always and everywhere a monetary phenomenon. . .” but fail to include the tail end of the quote: that “. . .it is and can be produced only by a more rapid increase in the quantity of money than in output.” As Roberts puts it, the part “‘than in output’ is where the real economics is.”

By Austrians, he means me and, in particular, this recent column for The Daily Economy on how economic statistical measures take on new meaning when they are adopted in policymaking. 

It is important to shed light on Roberts’s adopted perspective. As one might expect from finance insiders, he takes the full-on technocratic view and fails to address the economics of finance and inflation. So distorted and addicted to cheap credit is this industry that its players cannot conceive of finance (or investing) beyond the Federal Reserve System. Or, as Roberts puts it in the penultimate paragraph of his column, “the relevant question for investors isn’t whether the Fed will tighten policy. The relevant question is whether the fiscal setup will leave the Fed any room to tighten in the first place.”

Certainly, players in the finance sector make loads of money speculating on and arbitraging the Fed’s........

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