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.<br />After a successful career in the City, Tim became founder and chair of the Institute of International Monetary Research at the University of Buckingham.<br />I’ve followed his work for over three decades. <br />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.<br />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.<br />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.<br />Now we seem to be repeating the same, or at least a similar story. <br />Listen to the podcast for more. In this episode, we discuss:<br />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