Which Comes First, Inflation or Stability?
Imagine we get incremental money ( Δ M ) from the “ helicopter drop ,” so to speak. What would take place soonest? 1) The Fisherian way: We spend Δ M as soon as possible because “ Money is of no use until it is spent ” (1930, p.5). A silver lining nevertheless, the increment ( Δ M ) is never excrement. 2) The Keynesian way: Our “preference” is to hoard the additional “ liquidity ” ( Δ M ) in small rectangular solid pieces of paper or “thin-airy” demand deposits for fear of the “ liquidity trap ” (1936). 3) The Hicksian way: The real GDP momentarily shoots up as in M= k ∙ P ∙ Y (1937) with P “sticky” and k “constant.” 4) The Baumolite way: There will be inflation through a double channel; one the increment of Fisherian money of no use ( Δ M ) and the other the “doubling up” of the velocity of spending ( ΔV ) (1952). 5) The Mankiw style i...