Elon Musk, the accidental monetarist?
Musk has identified the right problem, but can he help fix it?
For decades, central bankers have dismissed monetary aggregates — measures of total money in circulation, such as M4 in the UK and M2 in the US — as outdated relics of a bygone era. Instead, they have staked their credibility on achieving a 2% inflation target, adjusting an overnight interest rate to influence borrowing costs throughout the economy.
As a monetarist, I have long argued about the fundamental relationship between broad money — currency plus bank deposits — and the determination of national income, and that monetary policy should not be focused on an arbitrary inflation target and discretionary changes to interest rates. The post-pandemic inflation surge showed this clearly: too much money was chasing too few goods. However, central bankers refuse to acknowledge their policy errors, preferring to keep faith in Keynesian orthodoxy. Libertarians and monetarists, of course, have long argued for a rules-based system that eliminates central bankers' discretion and warns of the perils of political interference in monetary policy decisions.
Enter Elon Musk. Not an economist, not a central banker — but the world’s richest man and a highly influential entrepreneur. Yet his recent criticisms of reckless government spending and unchecked money printing could have come straight from the pages of a monetarist textbook.
No stranger to controversy, Musk has now turned his focus on Washington’s fiscal excesses, which have seen the U.S. national debt balloon beyond $36 trillion with a staggering $1.9 trillion deficit expected for 2025 according to the Congressional Budget Office. Through his fledgling Department of Government Efficiency (DOGE), he has supposedly identified $170 billion in ‘estimated savings’ or $1,056 saved per taxpayer, according to the official DOGE website. A hefty sum, but barely a dent in the $5 trillion pandemic-era stimulus that flooded the economy and prepared the way for the subsequent inflationary surge, and below the ’$2 trillion’ he initially suggested.
Musk has emerged as a high-profile advocate for some free-market ideas, frequently invoking the work of Milton Friedman to criticize inflationary policies and state overreach. On X (formerly Twitter), Musk has shared multiple videos of Friedman, each accompanied by unambiguous praise. “Milton Friedman was spot on,” he wrote in one post highlighting Friedman’s condemnation of unchecked government spending. In another, Musk labelled him “the best,” quoting his remark that “Inflation is made in Washington because only Washington can create money.” He has also endorsed Friedman’s famous takedown of the ‘free lunch’ fallacy, calling it “wise words from a true genius.”
Musk’s argument is simple enough and reflects a clear recognition of Friedman’s monetarist insights. He warns of the dangers on the state’s monopoly over money creation, how inflation is the inevitable consequence of ‘printing’ too much money, and why a bloated government should be stripped down to its basic functions. And in this assessment, he is right.
Monetarism explains his concern. If the money supply grows faster than the economy’s ability to produce goods and services, prices will rise. This is not radical thinking; it is Economics 101. With interest rates held near zero in recent years, Washington borrowed cheaply, while the money supply exploded. In the year to February 2021, M2 in the US expanded by 26%, while M4 in the UK jumped by 15%. Predictably, inflation surged on both sides of the Atlantic.
Musk is right to criticize the Federal Reserve’s role in all of this. While Washington spent beyond its means, the Fed was only too happy to act as enabler, purchasing trillions of dollars in government bonds, effectively monetizing U.S. debt, and flooding the financial system with liquidity. When inflation predictably surged in 2021 and 2022, peaking at a high of 9.1% in June 2022 — following Friedman’s famous ‘long and variable lags’ of monetary transmission — the Fed seemed surprised. Monetarists, meanwhile, felt vindicated.
Across the Atlantic, the Bank of England repeated the mistake, pumping £450 billion into the economy through quantitative easing in 2020. Warnings from a small group of UK monetarists were brushed aside; inflation, officials insisted, would be 'transitory.' Eighteen months later in October 2022, inflation hit a 40-year high of 11.1%, and the nine members of the Monetary Policy Committee found themselves caught off guard (and no doubt a little embarrassed). Rather than owning up to their role in over-expanding the money supply, they scrambled for excuses — blaming the war in Ukraine, supply chain disruptions, even Brexit. Anything but their own policy failures.
But Musk, like me, sees it for what it really is: a failure of monetary policy. While central bankers tinkered with quarter-point rate adjustments, they ignored the elephant in the room — that inflation was inevitable the moment they flooded the system with ‘cheap’ central bank money.
The evidence is clear. The Federal Reserve ‘printed’ too many dollars, the Bank of England ‘printed’ too many pounds, and both institutions failed to anticipate the consequences. Inflation was not a sudden and unforeseeable shock; it was the predictable result of excessive monetary expansion. Musk sees it. Monetarists see it. The data confirms it. But policymakers refuse to acknowledge it.
Musk’s frustration is understandable — and one I share. He sees the U.S. awash in debt-laden dollars, with the Federal Reserve an eager accomplice in Washington’s spending spree; I see the UK grappling with a similar dilemma: QE-driven cash has inflated asset prices and deepened inequality, while the UK economy languishes — stagnant, with a political leadership bereft of ideas for much needed growth.
However, the solution is not to replace the current system with volatile speculative alternatives like digital tokens or a ‘Crypto Strategic Reserve,' recently enshrined in an executive order by his boss, President Trump. Instead, the solution lies in restoring monetary discipline with a rules-based central bank that aligns money supply growth with real economic output and insulates monetary policy from political meddling and excess. History suggests that neither central bank nor government will course-correct voluntarily. Without institutional reform, the same errors will be repeated and, in doing so, set the stage for the next crisis, while still dealing with the fallout from the current one.
Musk has identified the right problem. Whether he will be able to steer monetary excess (and government spending) back to sanity before the bill inevitably comes due, bringing with it higher taxes and austerity, remains to be seen — but he will have my backing in trying.
 | A guest post by
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Damian you assert that as a consequence of QE high inflation is a result. And now Elon Musk agrees and he feels printing money is a problem? I cannot disagree more! Your alignment with Musk on this are for different reasons in my view. I believe yours is a recognition of the statistics and an explanation of that correlation of inflation following QE or printing money. And Musk is just looking at his business model and his bottom line that blindly sees inflation as a problem to his strategy and bottom line. It’s a coincidence of both and misunderstanding of factors. I agree that governments are too big and so need to be streamlined. I also agree that the ability to lower and raise interest rates is arbitrary. In the UK they use interest rates to ‘kill off’ the economy or try and ‘stoke up’ the economy through cheap borrowing. But in reality it is trying to interfere at a time that is too late or too early in any cycle so is a sledgehammer to crack a nut! Not only that it’s a tool that doing one thing has a knock on effect to cause the other! It’s a continuous wave of misfortune. All it really does is allow Banks to earn more money at a time following QE and when they take too much and see the economy struggle under high interest rates they allow rates to fall! In my opinion the BoE does no real good! None! Except for themselves and the Banking industry of earning too much off the people of their Country. The main issue that is very clear is that the Rich have got richer off the people having to be poorer to afford that increase. The Governments allow the Rich few to be mega rich and the majority poorer and saddled with that ever increasing debt. And we are seeing before our eyes the results playing out. In truth, QE and Government borrowing is a monthly constant. Because, the government can not balance the books each month based on the tax take as it’s always short of expenditure! Inflation is the majority of people trying to make more money or profit to cover the extra taxes or higher tax rates on existing taxes through the need to earn more! Also inflation figures are massaged. So they are not a true figure. For example they base inflation on certain basic goods. Milk bread baked beans etc! Now I haven’t seen much prices rise in such things over my lifetime when you look at other cost rises like the price of a car or fuel! They suppress prices on most household prices of milk or bread in the supermarkets in my view to keep inflation low! That shows me all figures are subject to influence. Now I think it’s more simple to explain than using figures to see patterns of explanation. The Rich are richer! Because the system is skewed. And we allow it! The 95% of money is held by the top 5% of people. That’s undemocratic! It explains why the majority of people are struggling to afford the taxes asked of them and why they can’t cope with the earning required to pay our way each month. And that leads to our governments borrowing off who? Well it’s the Rich! As they hold 95% of money to borrow off! And guess what? They want their money back and more, a profit! So they get richer! And to balance that the rest have to get poorer and have even less ability to raise the taxes required and QE has to happen to supply the total needed to cover that expenditure! That why a milkman earns £25 a week in the sixties and if there was one today would need to earn £2500 say, today! That difference is printed money! The Banks can leverage deposits! So lend more than they have! If that isn’t a recipe for disaster I don’t know what is! So QE is not inflationary because too much money is chasing too few goods or services! It’s a necessity because tax take is too low because not enough money is in our monthly economy to afford the taxes the government need and inflation is the response of businesses and earnings needed to pay the extra taxes that come with the basic government position of not having enough tax revenue or tax take! An economy can only work if ALL 100% of money is revolving each month All of the time! Tax us taken by government when money moves or changes hands! For example if a employer SPENDS and pays an employee income tax and NI are triggered. When we SPEND VAT is triggered. When we SPEND and buy fuel or tobacco or alcohol Duty is triggered and when we SPEND on Council tax or business rates tax is triggered. And so on… tax is triggered by spending. The poor pay as much tax as they can as they spend all their money each month. A Rich person spends a very small amount if any each month snd so pays very little tax! So there lies the problem. If ALL money was SPENT back by the Rich few we the majority would not be devoid of it and would pay enough tax to cover the governments needs! The total tax take if the tsunami of money was spent each month would be so large we would need just one tax VAT. That would cut government costs by streamlining. Upto the seventies we had no ability to make money move. It was a hope after spending it would come back again. It’s been that way for centuries. But with computer banking, we can now trace every penny if it was all digital. My opinion is we can now have the best economic system. It can be perpetual and run at its optimum always. First, reinsure exchange control and stop money going outside the Country of origin. Secondly, replace ALL money in existence with a new digital currency held on computer in the UK. No longer allow money to leave our borders. When the ‘old money’ is exchanged, questions can be asked as to if they held it legally! Thirdly, make a proper evaluation of currency needed, that’s a maths question. As a population of 69 million needs more than one of say 5 million. Then make the rule to make money be spent or get it taken by central government! Spend or lose it! No one should be richer than government! Be Rich off the goods and services you buy not the money itself. Earn as much as you can but, you have to spend it! That’s democracy! We all have to have full use of all the money rotating triggering BAT through having to spend or risk loosing it to government. In turn we will pay more than enough to government for tax to be sufficient. No more borrowing! It will lead to increased earnings and higher wages. No need to borrow! Well earn all we need. No more benefits cuts! We’ll have enough to properly look after our ill, infirm, elderly, unemployed and the unemployable! They will have more money to spend also! Well only need one pension! A really good one! A state pension paid for by the workers if today for the pensioners of today! Who needs pension funds, stocks and shares banks and other institutions with their hands in our money! Make the 100% of all people have a taste of 100% of money each month! Thats true democracy and s proper use of all tools available to us now.