Inflation June 2022

Mark McIlroy


My thesis for economics is that raising interest rates has no effect on inflation at all, in fact it can make it worse.

Inflation is a monetary phenomenon. The monetarists failed to control inflation in the 1970's because they believed that banks created money. Banks are simply private sector businesses with no more capability to create money than a building supply business.

Only the issuer of a currency can create money, i.e. the RBA or the Federal Reserve.

These institutions create money to fund the federal government budget deficit. This action is the source of inflation.