The Cause Of Inflation And Management After The Financial Crisis To Our Country

Milton Friedman is one of the20century’s greatest economists in the world.He built up a huge achievement on the theory of consumption, currency history and monetary. His theory is a prescription to take out of the plight of development dilemma. Milton Friedman’s monetary theory and inflation theory relate each other. The monetary theory is the foundation of theory of inflation, at the same time, the goal of monetary theory is to express the theory of inflation. In the monetory theory, Milton Friedman came up with the demand of real money theory. he believed that the key factors of deciding the demand of real money are "permanent income", interest rates, the yields of securities and people’s preference; In the long term, the demand of real money depends on the social productive forces, so it is a stable variable. While the supply of money depends on financial system of a country. Because supply and demand of currency are determined independently, the money supply will impact the price. For this, Friedman pointed out that the inflation is a monetary phenomenon at any time. That is, he fromed the perspective of the money supply from source of inflation.In2008, China was impacted by the subprime mortgage crisis. In order to prevented the economy from downturning overall, the government carried out the both loose fiscal and monetary policy, with the goal to stimulate consumption and investment inhibitting the economy falling down dramatically. After a year of hard work, this goal finally realized, but it is also paid a huge price,that is the drastic inflation. The different scholars had different points of view on the reasons that caused this round of inflation. These views include the demand promotes the inflation, the supply promotes the inflation and the structure of both supply and demand promote the inflation,but in Milton Friedman’s opinion, the only one reason is too much monetary. This article makes the empirical analysis on the relationship between inflation and money supply, and the results show that the money supply is an important cause of the inflation, existing lagging effect.In order to control inflation, the central bank carrted out the tightening monetary policy, has repeatedly raised deposit reserve ratio, interest rate and launch open market operations, gaining the obvious effect; But there are also some problems, such as, the goal of policy is not very clear, the structure of regulation means is not reasonable and the controling power is not enough strong.In order to prevent inflation from appearing periodically, the central bank should have an independent status; the central bank should have explicit policy goal and have reasonable policy collocation.