It was Milton Friedman who correctly diagnosed the dangers of the inflation that began in the late 1960's, clearly saw its cause and prescribed a harsh but effective remedy. His key insight into the workings of the economy was summed up in this simple phrase: "Inflation is always and everywhere a monetary phenomenon." Alas this insight has been forgotten or willfully ignored, particularly by those who claim to be his disciples, for example Mr. Greenspan.

In the 1960's the party in power wanted to have it all, to please its constituents with expanded social and educational spending while fighting the threat of Godless Communism in Southeast Asia. The Federal Reserve, for political reasons and out of sheer ignorance, was willing to accommodate this desire by creating new money whenever the government debt increased. Interest rates were low, business and consumption were unchecked and the United States had the good fortune to be able to buy the excess goods that it demanded from other countries at fixed exchange rates.

This situation did not start to fall apart until the early 1970's. Friedman saw the obvious, the aggregate supply of money available in the economy for the purchase of goods and services was growing much faster than the capacity of the economy to produce these goods and services. At some point, he correctly predicted, there would be inflation. There was.

So now the party in power still wants to have it all. This time it pleases its constituents by reducing their taxes almost to nothing while fighting the threat of Islamowhatever in select countries that have chosen to defy us. Mr. Greenspan has created a steady stream of new money to finance the deficits without pesky increases in interest rates. We even have a foreign country that sells to us at fixed exchange rates which keeps prices down, for now. Good times.

But even now we can see the signs that the strategy is failing, Our President is currently in Saudi Arabia trying to talk down oil prices while other news notes a general boom in commodity prices. I am sure that there is a particular explanation for each of these and for the recent increases in food prices. There were always reasons for the price rises in the 1970's. Still the basic explanation is simple. Too much money chasing too few goods.

This realization has been a rather long time in coming, thanks to Mr. Greenspan's superior command of mumbo jumbo, smoke and mirrors. It is finally sinking in at the level where economic decisions are made and the consequences may be with us for some time to come.