{"id":44468,"date":"2023-10-04T08:05:42","date_gmt":"2023-10-04T08:05:42","guid":{"rendered":"https:\/\/thepatientinvestor.com\/?p=44468"},"modified":"2023-11-30T01:59:13","modified_gmt":"2023-11-30T01:59:13","slug":"causes-of-inflation-a-monetarist-perspective","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2023\/10\/04\/causes-of-inflation-a-monetarist-perspective\/","title":{"rendered":"Causes of inflation &#8211; a Monetarist perspective"},"content":{"rendered":"<p>20-minute summary by Prof. John Hearn<\/p>\n<p><span class=\"embed-youtube\" style=\"text-align:center; display: block;\"><iframe loading=\"lazy\" class=\"youtube-player\" width=\"525\" height=\"296\" src=\"https:\/\/www.youtube.com\/embed\/F_c-VnnOYm8?version=3&#038;rel=1&#038;showsearch=0&#038;showinfo=1&#038;iv_load_policy=1&#038;fs=1&#038;hl=en-US&#038;autohide=2&#038;wmode=transparent\" allowfullscreen=\"true\" style=\"border:0;\" sandbox=\"allow-scripts allow-same-origin allow-popups allow-presentation allow-popups-to-escape-sandbox\"><\/iframe><\/span><\/p>\n<p>Cost-push inflation is a myth. Rising prices do not cause inflation unless you have more units of money to spend.<\/p>\n<p>Demand-pull &#8212; caused by an expanding supply of money and its effect on aggregate demand &#8212; is only way you get inflation.<\/p>\n<p>Managers of the money stock (central banks) are the cause.<\/p>\n<p>If you only have \u00a3100 to spend and the price of gas goes up, you can still only spend \u00a3100. The relative prices of the basket of goods you purchase will adjust to find a new equilibrium. <\/p>\n<p>But if the government borrows an extra \u00a310 from the central bank, increasing the stock of money, prices will adjust to include the additional \u00a310 spent by the government. The same basket of goods will now cost \u00a3110 and you have inflation.<\/p>\n<p>That is why central banks hate monetarists. They would prefer you to believe that rising prices (cost-push) causes inflation.<\/p>\n<p>Their deception is aided by the time lag between &lt;&gt;M and &lt;&gt;P of up to 2 years (&lt;&gt; = delta\/change). From Milton Friedman&#8217;s Quantity Theory of Money: M * V = P * T (where M is money stock, V is velocity of money flow, P is prices and T is transactions)<\/p>\n<p>Not all government borrowing is inflationary as it does not increase M unless debt is bought by the central bank.<\/p>\n<div class=\"content_block\" id=\"custom_post_widget-44827\"><p><!-- AD START --><\/p>\n<div id=\"pi-ad\">\n<div id=\"pi-ad-hd\">Save 50% on an Annual Subscription.<\/div>\n<div id=\"pi-ad-content\">\n<div id=\"pi-ad-logo\" align=\"center\">\n<div><img data-recalc-dims=\"1\" decoding=\"async\" src=\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/pan\/images\/patient-investor\/patient-investor-logo-2020-10-17.jpg?w=525&#038;ssl=1\" alt=\"\" \/><\/div>\n<div>the patient investor<\/div>\n<\/div>\n<div id=\"pi-ad-offer\" align=\"center\"><a href=\"https:\/\/thepatientinvestor.com\/index.php\/subscribe\/special-offer-market-analysis-3\" target=\"_blank\" rel=\"noopener\"><span style=\"\">Colin Twiggs\u2019 newsletter offers weekly coverage of financial markets and the economy \u2013 including macro trends, key sectors, energy and precious metals.<\/span><span style=\"\">Save&nbsp;50% on a new annual subscription to Market Analysis (normal price: $195 AUD or $145 USD). <span style=\"\">This subscription may be tax deductible &#8211; ask your accountant.<\/span> <\/span><span id=\"pi-ad-button\">Save Now &gt;<\/span><span style=\"\"><span style=\"white-space:nowrap;\">Offer valid until<\/span> midnight <span style=\"white-space:nowrap;\">September 15, 2025<\/span>. <span style=\"white-space:nowrap;\">New subscribers only.<\/span><\/span><\/a><\/div>\n<\/div>\n<\/div>\n<p><!-- AD END --><\/p>\n<p><!--\nGeneral Ad:\n\n\n<div id=\"pi-ad-hd\">This may be the best investment you make this year.<\/div>\n\n\n\n\n<div id=\"pi-ad-content\">\n\n\n<div id=\"pi-ad-logo\" align=\"center\">\n\n\n<div><img decoding=\"async\" src=\"https:\/\/www.incrediblecharts.com\/pan\/images\/patient-investor\/patient-investor-logo-2020-10-17.jpg\" alt=\"\"><\/div>\n\n\n\n\n<div>the patient investor<\/div>\n\n\n<\/div>\n\n\n\n\n<div id=\"pi-ad-offer\" align=\"center\"><a target=\"_blank\" href=\"https:\/\/thepatientinvestor.com\/index.php\/subscribe\/special-offer-market-analysis\/\" rel=\"noopener\"><span style=\"\">Market Analysis newsletter offers weekly coverage of financial markets and the economy \u2013\u00a0including macro trends, key sectors, energy and precious metals.<\/span><span style=\"\">Take advantage of our <u>$1 special<\/u>. New subscribers only. <\/span><span id=\"pi-ad-button\">Save Now &gt;<\/span><\/a><\/div>\n\n\n<\/div>\n\n\nBlackFriday2023:\n\n\n<div id=\"pi-ad-hd\">Save $95\u00a0AUD (or $70 USD) on a Market Analysis subscription.<\/div>\n\n\n\n\n<div id=\"pi-ad-offer\" align=\"center\"><a target=\"_blank\" href=\"https:\/\/thepatientinvestor.com\/index.php\/subscribe\/special-offer-market-analysis-3\/\" rel=\"noopener\"><span style=\"\">Market Analysis newsletter offers weekly coverage of financial markets and the economy \u2013\u00a0including macro trends, key sectors, energy and precious metals.<\/span><span style=\"\">Save on a new Market Analysis annual subscription. <span class=\"nowrap\">Offer extended until December 4, 2023<\/span>.<\/span><span id=\"pi-ad-button\">Save Now &gt;<\/span><\/a><\/div>\n\n\n<span style=\"\">Take advantage of our exclusive <span style=\"text-decoration:underline;color:#215468;\">Black Friday special<\/span>: save\u00a0$95 ($70\u00a0USD) on a new subscription. <span class=\"nowrap\">Offer expires November 24, 2023<\/span>.<\/span>\n--><\/p>\n<\/div><!-- id=44827-->\n","protected":false},"excerpt":{"rendered":"<p>20-minute summary by Prof. John Hearn Cost-push inflation is a myth. Rising prices do not cause inflation unless you have more units of money to spend. Demand-pull &#8212; caused by an expanding supply of money and its effect on aggregate demand &#8212; is only way you get inflation. Managers of the money stock (central banks) &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/thepatientinvestor.com\/index.php\/2023\/10\/04\/causes-of-inflation-a-monetarist-perspective\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;Causes of inflation &#8211; a Monetarist perspective&#8221;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[13],"tags":[6113,6112,6114,6116,6115],"class_list":["post-44468","post","type-post","status-publish","format-standard","hentry","category-inflation-economy","tag-cost-push-inflation","tag-demand-pull-inflation","tag-monetarism","tag-mvpt","tag-quantity-theory-of-money"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Causes of inflation - a Monetarist perspective - the patient investor<\/title>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Causes of inflation - a Monetarist perspective - the patient investor\" \/>\n<meta property=\"og:description\" content=\"20-minute summary by Prof. John Hearn Cost-push inflation is a myth. Rising prices do not cause inflation unless you have more units of money to spend. Demand-pull &#8212; caused by an expanding supply of money and its effect on aggregate demand &#8212; is only way you get inflation. Managers of the money stock (central banks) &hellip; Continue reading &quot;Causes of inflation &#8211; a Monetarist perspective&quot;\" \/>\n<meta property=\"og:url\" content=\"https:\/\/thepatientinvestor.com\/index.php\/2023\/10\/04\/causes-of-inflation-a-monetarist-perspective\/\" \/>\n<meta property=\"og:site_name\" content=\"the patient investor\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/profile.php?id=61572934660810\" \/>\n<meta property=\"article:author\" content=\"https:\/\/facebook.com\/people\/The-Patient-Investor\/61572934660810\/\" \/>\n<meta property=\"article:published_time\" content=\"2023-10-04T08:05:42+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-11-30T01:59:13+00:00\" \/>\n<meta name=\"author\" content=\"Colin Twiggs\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Colin Twiggs\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"1 minute\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/thepatientinvestor.com\\\/index.php\\\/2023\\\/10\\\/04\\\/causes-of-inflation-a-monetarist-perspective\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/thepatientinvestor.com\\\/index.php\\\/2023\\\/10\\\/04\\\/causes-of-inflation-a-monetarist-perspective\\\/\"},\"author\":{\"name\":\"Colin Twiggs\",\"@id\":\"https:\\\/\\\/thepatientinvestor.com\\\/#\\\/schema\\\/person\\\/d42b18d516a80149d739845749ac6454\"},\"headline\":\"Causes of inflation &#8211; a Monetarist perspective\",\"datePublished\":\"2023-10-04T08:05:42+00:00\",\"dateModified\":\"2023-11-30T01:59:13+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/thepatientinvestor.com\\\/index.php\\\/2023\\\/10\\\/04\\\/causes-of-inflation-a-monetarist-perspective\\\/\"},\"wordCount\":248,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\\\/\\\/thepatientinvestor.com\\\/#organization\"},\"keywords\":[\"Cost-Push Inflation\",\"Demand-Pull Inflation\",\"Monetarism\",\"MV=PT\",\"Quantity Theory of Money\"],\"articleSection\":[\"Inflation\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\\\/\\\/thepatientinvestor.com\\\/index.php\\\/2023\\\/10\\\/04\\\/causes-of-inflation-a-monetarist-perspective\\\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/thepatientinvestor.com\\\/index.php\\\/2023\\\/10\\\/04\\\/causes-of-inflation-a-monetarist-perspective\\\/\",\"url\":\"https:\\\/\\\/thepatientinvestor.com\\\/index.php\\\/2023\\\/10\\\/04\\\/causes-of-inflation-a-monetarist-perspective\\\/\",\"name\":\"Causes of inflation - a Monetarist perspective - the patient investor\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/thepatientinvestor.com\\\/#website\"},\"datePublished\":\"2023-10-04T08:05:42+00:00\",\"dateModified\":\"2023-11-30T01:59:13+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/thepatientinvestor.com\\\/index.php\\\/2023\\\/10\\\/04\\\/causes-of-inflation-a-monetarist-perspective\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/thepatientinvestor.com\\\/index.php\\\/2023\\\/10\\\/04\\\/causes-of-inflation-a-monetarist-perspective\\\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/thepatientinvestor.com\\\/index.php\\\/2023\\\/10\\\/04\\\/causes-of-inflation-a-monetarist-perspective\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/thepatientinvestor.com\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Causes of inflation &#8211; a Monetarist perspective\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/thepatientinvestor.com\\\/#website\",\"url\":\"https:\\\/\\\/thepatientinvestor.com\\\/\",\"name\":\"The Patient Investor\",\"description\":\"Smart. 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He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters. Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis. Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008\\\/2009 and 2020 bear markets well ahead of actual events. He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.\",\"sameAs\":[\"https:\\\/\\\/facebook.com\\\/people\\\/The-Patient-Investor\\\/61572934660810\\\/\",\"https:\\\/\\\/www.instagram.com\\\/colin_thepatientinvestor\",\"https:\\\/\\\/au.linkedin.com\\\/in\\\/colintwiggs\"],\"url\":\"https:\\\/\\\/thepatientinvestor.com\\\/index.php\\\/author\\\/investor\\\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Causes of inflation - a Monetarist perspective - the patient investor","robots":{"index":"noindex","follow":"follow"},"og_locale":"en_US","og_type":"article","og_title":"Causes of inflation - a Monetarist perspective - the patient investor","og_description":"20-minute summary by Prof. John Hearn Cost-push inflation is a myth. Rising prices do not cause inflation unless you have more units of money to spend. Demand-pull &#8212; caused by an expanding supply of money and its effect on aggregate demand &#8212; is only way you get inflation. 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He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters. Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis. Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008\/2009 and 2020 bear markets well ahead of actual events. He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.","sameAs":["https:\/\/facebook.com\/people\/The-Patient-Investor\/61572934660810\/","https:\/\/www.instagram.com\/colin_thepatientinvestor","https:\/\/au.linkedin.com\/in\/colintwiggs"],"url":"https:\/\/thepatientinvestor.com\/index.php\/author\/investor\/"}]}},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p9tQ4n-bze","jetpack_likes_enabled":false,"jetpack-related-posts":[{"id":23820,"url":"https:\/\/thepatientinvestor.com\/index.php\/2021\/01\/23\/can-the-fed-keep-a-lid-on-inflation\/","url_meta":{"origin":44468,"position":0},"title":"Can the Fed keep a lid on inflation?","author":"Colin Twiggs","date":"January 23, 2021","format":false,"excerpt":"Jeremy Siegel, Wharton finance professor, says the Fed has poured a tremendous amount of money into the economy in response to the pandemic, which will eventually cause higher inflation. David Rosenberg of Rosenberg Research argues that velocity of money is declining and the US economy has a large output gap\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":21158,"url":"https:\/\/thepatientinvestor.com\/index.php\/2020\/08\/03\/australia-its-the-demand-side-stupid\/","url_meta":{"origin":44468,"position":1},"title":"Australia: It&#8217;s the demand side, stupid","author":"Colin Twiggs","date":"August 3, 2020","format":false,"excerpt":"What Australia and most developed economies need is more government spending on productive infrastructure, to make up for the hole in demand caused by the coronavirus recession. Low inflation clearly signals that the underlying problem is falling demand (consumer spending and business investment) and not deficiencies on the supply side.\u2026","rel":"","context":"In &quot;Australia &amp; NZ&quot;","block_context":{"text":"Australia &amp; NZ","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/australia-nz-countries-regions\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":34792,"url":"https:\/\/thepatientinvestor.com\/index.php\/2022\/07\/20\/the-feds-money-supply-headache\/","url_meta":{"origin":44468,"position":2},"title":"The Fed&#8217;s money supply headache","author":"Colin Twiggs","date":"July 20, 2022","format":false,"excerpt":"Gerard Minack was kind enough to submit his comments on our recent newsletter regarding inflation: Jay Powell is selling but the bond market isn\u2019t buying. There is a lot that we agree on but there are also differences that are worth examining. Inflation is largely a reflection of excess fiscal\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/minack-netlending-wealth.png?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":26010,"url":"https:\/\/thepatientinvestor.com\/index.php\/2021\/05\/27\/inflation-gdp-and-the-money-supply\/","url_meta":{"origin":44468,"position":3},"title":"Inflation, GDP and the money supply","author":"Colin Twiggs","date":"May 27, 2021","format":false,"excerpt":"I receive plenty of advice in my inbox along the lines of \"Inflation hasn't been a problem for more than twenty years. Nothing has changed. Price spikes are transitory. This is stale news. Nothing to see here. Move along now.....\" I keep coming back to this chart, which shows the\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":25184,"url":"https:\/\/thepatientinvestor.com\/index.php\/2021\/04\/14\/inflation-is-baked-into-the-cake\/","url_meta":{"origin":44468,"position":4},"title":"Inflation is baked into the cake","author":"Colin Twiggs","date":"April 14, 2021","format":false,"excerpt":"Inflation is a hot topic at the moment. For good reason: higher inflation would drive up interest rates, affecting both bond and equity prices, as well as commodities and precious metals. March CPI jumped to 2.64% but the increase is partly attributable to the low base from March 2020. Core\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":45717,"url":"https:\/\/thepatientinvestor.com\/index.php\/2023\/11\/28\/australia-more-rate-hikes-or-tighter-liquidity\/","url_meta":{"origin":44468,"position":5},"title":"Australia: More rate hikes or tighter liquidity","author":"Colin Twiggs","date":"November 28, 2023","format":false,"excerpt":"The media focused on a passing \"dentists and hairdressers\" comment instead of the key message from Michele Bullock's address to Australian Business Economists. The new RBA governor highlighted three elements that point to inflation becoming increasingly demand-driven. First, inflation is broadly-based. Trimmed mean inflation remains too high at 5.4% p.a.\u2026","rel":"","context":"In &quot;Australia &amp; NZ&quot;","block_context":{"text":"Australia &amp; NZ","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/australia-nz-countries-regions\/"},"img":{"alt_text":"CPI Monthly","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2023\/2023-11-27-aus-monthly-cpi.gif?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2023\/2023-11-27-aus-monthly-cpi.gif?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2023\/2023-11-27-aus-monthly-cpi.gif?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2023\/2023-11-27-aus-monthly-cpi.gif?resize=700%2C400&ssl=1 2x"},"classes":[]}],"_links":{"self":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/44468","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/comments?post=44468"}],"version-history":[{"count":6,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/44468\/revisions"}],"predecessor-version":[{"id":45876,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/44468\/revisions\/45876"}],"wp:attachment":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/media?parent=44468"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/categories?post=44468"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/tags?post=44468"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}