Money acts as a claim that its owner has to a certain portion of all market goods and services. It is, in essence, the means by which all market goods and services are distributed among people. The more money one has, the greater claims to goods and services they possess.

However, the creation of greater quantities of money by central planners does not magically increase the quantity of goods and services. The addition of new, freshly created money does not readily get matched by a corresponding increase in production.

New production may be stimulated by artificial increases to the money supply. But it is only to address false demand created by the resulting price distortions. These price distortions lead to excess production to meet the false demand. This excess production ultimately leads to supply gluts and economic pain.

Similarly, new, freshly created money does not increase people’s claims to goods and services. It does not increase how much they can consume. Rather, it dilutes each individual monetary unit, which is then expressed in rising prices.

The genesis of consumer price inflation can be found in money supply inflation. Money supply inflation is the direct act of central planners. The inflation of the money supply comes first. Consumer prices then follow.

Most academic economists naively believe that lack of money is the source of economic stagnation. They advocate credit creation and money printing as a means to increase consumption. These policies generally lead to higher debt levels and higher asset and consumer prices.