Econintersect: Princeton professor and Nobel Laureate Christopher A. Sims discusses how expectations drive inflation using some of the new types of theory that recognize the role of bank created money in a dominant role that is coupled with government debt for determination of an effective money supply. He explains why the classical Friedman equation (MV = PY) no longer works in isolation. The current fiscal and monetary disconnection of the Eurozone is discussed.
Source:
- Inflation, Fear of Inflation and Public Debt (Christopher A. Sims, Lindau Nobel Laureate Meetings 2014)