Monetarism is a set of ideas developed in the 1960s and 1970s, most notably by Milton Friedman in the United States and by Patrick Minford in the United Kingdom. Monetarism's basic claims are twofold, with the first clearing the ground for the second's more substantive argument about the pathologies of the state. First, the Great Depression was caused by shortsighted Federal Reserve policy that led to a decline in the money supply. Contra Keynesianism, it was not caused by underconsumption or by a decline in the level of money income. This claim called into question the causal relationship between money and income seen by Keynesians. Second, and more important for enabling austerity arguments a generation later, is Freidman arguing that attempts by the government to stimulate the economy to full employment, which it would be tempted to do if it got that causal relationship backwards, can only show up as inflation.

Mark Blyth, Austerity, loc. 408