The Early 1990s

Notes from the Money Growth and Inflation PDF:

Furthermore, the experience of the early 1990s illustrates that there can be notable deviations from the general relationship. For example, figure 3b shows that the four-year average of money growth minus real output growth slowed substantially from 1991 through 1995 and has increased rather sharply since. Despite the finding of a fairly close relationship between money growth and inflation using four-year averages, inflation fell steadily over this entire period.

Here is the relevant figure:

He is talking about that purple V there in the lower right, and the black line dropping consistently with no regard for the V.

This "notable deviation" is a reflection of the monetary preparation for the "miracle" years, that I discussed in the Rise and Fall post. That monetary preparation included an increase in the growth rate of money, and a fall in the growth rate of debt.

I cannot emphasize enough the importance of the debt-per-dollar ratio.