Academic

INVESTOR?S BUSINESS DAILY: THE MAJOR POLITICAL IMPLICATIONS OF QE2. In his 1991 book, ?Monetary ?

By Glenn Reynolds

INVESTOR’S BUSINESS DAILY: THE MAJOR POLITICAL IMPLICATIONS OF QE2.

In his 1991 book, “Monetary Mischief,” Friedman concludes from his lifelong study of monetary policy that there is a pattern in the lags.

Six to nine months after an injection to the money supply, there is a short-term increase in economic activity. After 24 months, inflation appears and is persistent until money growth is slowed, another recession occurs, and 24 months pass before the inflation is abated.

If these lags are superimposed on the nation’s political calendar, there is a disturbing conclusion.

A short-term increase in economic activity will occur before the 2012 presidential election, and a virulent inflation will occur after the votes are in.

Read the whole thing. I wonder, however, if Friedman’s timetable still holds true in our more tightly-coupled era.

Full post as published by Instapundit.com on January 14, 2011 (boomark / email).