Abstract
The quantity theory of money is an enduring idea, which shows in many guises. At its heart is a truth. Government borrowing is the root of inflation and a source of market distortions. Although two centuries have passed since David Ricardo explained how state debt leads inevitably either to taxation or to currency debasement, that truth is little understood. All manner of scapegoats – rising import prices, ‘excessive’ wage demands, high interest rates – are usually nothing more than symptoms of excessive government borrowing.
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