What Is Monetarism?

Monetarism is a macroeconomic theory that emphasizes the importance of money — specifically, the supply of money — in determining a nation’s economic health. The central claim? “Inflation is always and everywhere a monetary phenomenon.” That’s economist Milton Friedman, the intellectual father of Monetarism. Friedman argued that when a central bank increases the money supply faster than the economy grows, inflation is inevitable. Too much money chasing too few goods — prices rise. Simple as that.