Monetarists claim to be advocates of the free market and are generally critical of the heavy fiscal interventionism and deficit spending of the Keynesians.

However, they combine their defense of the market order in most areas with the promotion of a state-run monetary system, which includes state paper money issued by the central bank and constant, albeit controlled, inflationism to aid growth.


Consequently, in recent crises, most governments have fully embraced both sets of recipes. The media and the public have learned to accept both policy prescriptions as the inseparable twins of modern anticrisis management. Deficit spending and money injections are simply what one does in recessions.

Intellectually, the two schools are very similar too. Both are part of the twentieth century’s trend toward methodological collectivism and macroeconomics.


…. money injections always affect relative prices, they must disorient the economic agents by sending wrong signals, in particular with respect to the true extent of available savings, and they will consequently encourage a price formation, a resource allocation, and a direction of economic activity that are not in synch with the true underlying preferences of society. Money injections always lead to economic dislocation.

The ongoing moderate inflationism that Monetarism prescribes is far from benign. By sanctioning the ongoing injection of new money into the economy, a Monetarist policy will lead to the accumulation of dislocations that make a crisis at a later stage unavoidable. A stable or only marginally rising price index will convey a false picture of stability while the actual shifts in prices and resource allocation that the money injections create go undetected.

Paper Money Collapse