Snippets: Volcker ignored the cost

From mine of 3 January:

I have no problem with [the idea that the price level cannot rise unless money allows it to happen]. But I do have a problem with Volcker's assumption that rising cost does not matter. When prices are rising because we have "too much money", cost is not likely to be a problem. But when prices have to rise because costs are rising, slowing the growth of money and credit does not solve the cost problem. It may reduce inflation, but it does not solve the problem.

Volcker chose to ignore the cost problem. Economic growth slowed as a result.

In a cost-push economy, inflation is a solution to the cost problem. Putting extra money into the economy reduces the problem of problematic cost. I think it's the wrong solution... But restricting money growth makes the cost problem worse -- and that was Volcker's solution.