Global inflation has seemingly come as a surprise to all but the small tribe of monetarists who hold that any model of inflation should include a genuflection (a bending of the knee) to the role played by money. Much more money in the form of bank deposits is likely to mean an excess supply of money over the willingness to hold onto that money — and for other assets and goods and services to be substituted for money, adding to demand and upward pressures on prices and output.

The value of deposits held in US banks and money market funds has grown by about 36% or $5.5-trillion since January 2020. The system is heavily overweight money — and underweight other assets, goods and services. The effect on demand for assets, goods, services and labour has been felt for some time. If anything, Covid stimulus has worked too well...

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