Why monetarism is common sense

In the latest episode of the New Money Review podcast I’m delighted to welcome Tim Congdon, an economist and leading advocate of monetarism.After a successful career in the City, Tim became founder and chair of the Institute of International Monetary Research at the University of Buckingham.I’ve followed his work for over three decades. In the early 1990s, when I was working as a bond fund manager, the UK’s central bank was keeping interest rates at over 10% in an attempt to make sterling shadow the deutsche mark.Tim forecast that UK interest rates would soon fall from double figures, based on sluggish money supply growth that, in his view, meant a recession was coming.In the end, the Bank of England had to abandon its exchange rate target, sterling rates fell sharply and—as I had followed Tim’s advice rather than the consensus view—my fixed income clients did very well.Now we seem to be repeating the same, or at least a similar story. Listen to the podcast for more. In this episode, we discuss:Why Congdon became a monetaristHow money supply figures gave advanced warning of inflation in early 2020Why central bankers’ interest-rate-only macroeconomics is wrongWhy we should assess central bankers’ performance against money supply targetsWhy quantitative easing was necessary in 2008/09Why low money supply growth now presages a recessionWhy we will soon see falling interest ratesWhy the basic principles of monetarism are common senseHow money supply targeting could help dampen boom/bust cyclesWhy CBDCs could affect the way we measure money