Monetarism is a hoary old myth that does its damage in two distinct ways. The first is that, piggybacking on Milton Friedman’s personality, basically an entire generation of economists are actually monetarist in their practical thinking. Greg Mankiw once remarked that New Keynesianism should more accurately be called New Monetarism and a glance at the actual pronouncements of even the more self-critical the New Keynesiansshows this beyond a shadow of a doubt.

The second way in which monetarism does its damage is what might be called ‘man-in-the-street-monetarism’. Man-in-the-street-monetarism is the knee-jerk reaction you get from people who have no training in economics (and some people who actually do but obviously weren’t paying close attention!) but who nevertheless read about economic matters and so forth. When they hear ‘money printing’ they instantly think ‘inflation’. This can interfere with conversations at dinner parties but it also infects the journalistic media. In…