There is a good reason to focus on nominal GDP as the best rough-and-ready measure of monetary policy rather than measures of the money supply: velocity is not constant. I give my views on that in my column “Optimal Monetary Policy: Could the Next Big Idea Come from the Blogosphere?" I also have a children’s storybook to explain why velocity drops dramatically when interest rates are stuck at zero rather than being able to go into negative territory: “Gather ’round, Children, Here’s How to Heal a Wounded Economy.”
Allan Meltzer, by contrast, has these thoughts:
Never in history has a country that financed big budget deficits with large amounts of central-bank money avoided inflation. Yet the U.S. has been printing money—and in a reckless fashion—for years.
The Fed focuses far too much attention on distracting monthly and quarterly data, while ignoring the longer-term effects of money growth.
We are now left with the overhang. Inflation is in our future. Food prices are leading off, as they did in the mid-1960s before the "stagflation” of the 1970s. Other prices will follow.