This article is taken from the December-January 2025 issue of The Critic. To get the full magazine why not subscribe? Right now we’re offering five issues for just £10.

Why did Kamala Harris lose the US Presidential election? Undoubtedly, a key negative influence on her campaign was inflation. In 2022 consumer prices did not rise at a double-digit annual rate, but the peak number of above 9 per cent was not far off that ignominious threshold. The Biden presidency saw the highest American inflation for over 30 years, and the Democrats and Harris were blamed for it.

But the argument here will be that the blame lies elsewhere, that Harris’ elite economist supporters in the Democratic Party, many at top Ivy League departments, have done a thoroughly bad job in analysing the inflation episode. They have let her down. The failure has been largely due to their Keynesian ideological blinkers.

When Covid-19 hit in early 2020, the Fed and the US Treasury worked together to boost the American economy, whilst President Trump backed stimulatory measures almost regardless of cost. In a mere five months to July the quantity of money — on a broadly-defined M3 measure which includes most bank deposits — climbed by an astonishing 19 per cent. In the year to June, money jumped by over 25 per cent, the highest figure since 1943.

As a monetary commentator of almost 50 years’ standing, I was astonished by these developments. In my June 2020 column for The Critic I highlighted the money growth acceleration, and concluded that if money growth continued at the same sort of rate “the world’s largest economy is likely to see double-digit inflation and sky-high interest at some point in the next few years”.

This followed my April warning in the Wall Street Journal titled “Get Ready for the Return of Inflation”.

I did not expect the trouble to be immediate, not least because Milton Friedman, the leader of monetarist economists in the late 20th century, always warned of “long and variable lags” between money and inflation.

Typically, he envisaged the lag as being about two years. Anyhow money growth did moderate after July 2020 and double-digit inflation was avoided, if only just. I was also right about the leap in interest rates, which came in 2022 and 2023.

If my monetary approach is correct (and no one can dispute the relative accuracy of my forecasts), the actions responsible for the inflation surge of 2021 and 2022 were taken during Donald Trump’s first presidency. His Treasury Secretary, Steven Mnuchin, was heavily involved in them and complicit in their results.

If Harris had been effective in blaming the Fed and Mnuchin for inflation, she might have won the 2024 election

When the inflation came through during the Biden presidency from late 2021, and particularly in 2022, that was Friedman’s lag at work. Although Biden may have made mistakes, the bulk of the blame for the inflation flare-up falls on the first Trump administration and decisions at the Federal Reserve in spring 2020.

If Harris had been articulate and effective in criticising Mnuchin and the Fed for the inflation, she might have won the 2024 presidential election. But she was handicapped by an absence of intellectual guidance and support from the Democrat-leaning Keynesians.

Joe Biden said in 2020 that Milton Friedman “wasn’t running the show any more”, but that did not excuse leading Democrat economists paying no attention whatsoever to the money explosion. Paul Krugman’s column in the New York Times is so widely read that he is often regarded as the world’s most influential economist.

A staunch Keynesian, he noticed in early 2021 that a handful of economists were talking about excess money growth as the cause of the inflation then emerging.

He sneered at them, drawing a distinction between “zombie ideas”, which shamble along “eating people’s brains”, and the much worse “cockroach ideas”, which despite their falsity “always come back”. Monetarists’ claim of a connection between money and inflation was, said Krugman, merely a cockroach idea. In his words, the then-emerging “buzz” about the subject was evidence of “an infestation of monetary cockroaches”.

More intelligent was the reaction from Larry Summers, Treasury Secretary under President Clinton. Indeed, in May 2021 he was using phrases in a CNN interview which could be interpreted as monetarist in flavour. To quote, “We are printing money, we are creating government bonds, we are borrowing on unprecedented scales.” He was anxious about the inflation prospect.

However, the focus of his anxiety was not the money growth explosion of spring 2020 which had alarmed me, but the Biden fiscal package of February 2021.

Summers, like Krugman or such figures as Jo Stiglitz of Columbia University or Obama’s economic adviser Jason Furman from Harvard, is very Keynesian, in that he deems fiscal policy to be the heart of macro policy-making and spends hardly any time looking at money data.

With the election over, a safe forecast can be made. Trump will ignore Krugman, Summers, Stiglitz, Furman et al. He may respect the Federal Reserve’s independence, but no one will be surprised if he does not. More than ever, the USA needs good economists and good economics, and the quantity theory of money remains a vital element in sensible forward thinking about policy.