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Thanks for the response! The conversation became quite lengthy and I think I hit most of those points (much less concisely). He’s still convinced that money creation does not cause increased prices (and he calls the rise in prices ‘inflation’ rather than the money creation). I’ve gone round and round with him using all the logic and examples I could think of. He finally said Austrian economics was wrong because most the vast majority of economists reject it… Which I took as a victory. But one thing he said that I don’t know what to respond to is that “the data just doesn’t support it.” He produced this Krugman article http://krugman.blogs.nytimes.com/2012/11/29/varieties-of-error/ that contains a graph showing the growth of the monetary base since 2008 and a relatively flat CPI as evidence that money creation does not cause an increase in CPI.
My assumption is that CPI has not gone up because the banks are sitting on the new money rather than lending it into circulation, but even then, are we to expect prices to go up with exact proportion to the money creation? I would expect there to be a plethora of data showing money creation reaping high prices considering our history.