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The US "printed money" after 2008, and it did not cause inflation. Maybe your understanding is wrong.

throw0101a 7y ago
The printing-money-will-not-cause-inflation was predicted by Keynesians: > Suddenly it seems as if everyone is talking about inflation. Stern opinion pieces warn that hyperinflation is just around the corner. And markets may be heeding these warnings: Interest rates on long-term government bonds are up, with fear of future inflation one possible reason for the interest-rate spike. > But does the big inflation scare make any sense? Basically, no — with one caveat I’ll get to later. And I suspect that the scare is at least partly about politics rather than economics. * https://www.nytimes.com/2009/05/29/opinion/29krugman.html https://www.nytimes.com/2009/05/29/opinion/29krugman.html The economic models said that the Fed should have decreased interest rates until they reached -6.7% (i.e., well below zero), but this that was impractical, the next-best thing was flood the market with cash equivalent, and that inflation would not appear: * https://krugman.blogs.nytimes.com/2009/11/16/the-madness-of-the-inflation-hawks/ https://krugman.blogs.nytimes.com/2009/11/16/the-madness-of-... > It seemed totally obvious to many people that with the Fed adding to the monetary base at breakneck speed, high inflation just had to be around the corner. That’s what history told us, right? > Except that those who knew their Hicks declared that this time was different, that in a liquidity trap the rise in the monetary base wouldn’t be inflationary at all (and that the relevant history was from Japan since the 1990s and from the 1930s, which seemed to confirm this claim). And so it proved, as shown by the red marker down at the bottom. * https://krugman.blogs.nytimes.com/2015/05/17/money-inflation-and-models/ https://krugman.blogs.nytimes.com/2015/05/17/money-inflation... > According to mainstream theory, among the characteristics of a liquidity trap are interest rates that are close to zero and changes in the money supply that fail to translate into changes in the price level.[2] * https://en.wikipedia.org/wiki/Liquidity_trap https://en.wikipedia.org/wiki/Liquidity_trap The [2] is a 1998 paper by Krugman talking about Japan. So ten years before the Great Recession there were already models on how to think about increasing M2 from other countries' experiences.
- afterburner 7y ago
  Exactly, thank you. It's also worth noting Keynesian economics was 70 years old in 2008. People willingly forgot this stuff to justify other political priorities.
Proziam 7y ago
The buying power of $1 USD has diminished massively over time and continues to do so. Every year the money in your wallet is worth at least 1.8% less. Over your lifetime that becomes a substantial loss in buying power.
- luckydata 7y ago
  1.8% is significantly below the targets those policies are pursuing. So printing money doesn't seem to be producing any (desired) increased inflation.
- basementcat 7y ago
  That is an example of monetary policy working exactly as intended. If the buying power of $1 USD didn’t diminish, there would be an incentive for people to hoard their wealth instead of investing and spending their wealth to build the economy.
shrewduser 7y ago
the US dollar was also in massive demand during 2008 as it is during every downturn or when risk goes up.

The printing-money-will-not-cause-inflation was predicted by Keynesians: > Suddenly it seems as if everyone is talking about inflation. Stern opinion pieces warn that hyperinflation is just around the corner. And markets may be heeding these warnings: Interest rates on long-term government bonds are up, with fear of future inflation one possible reason for the interest-rate spike. > But does the big inflation scare make any sense? Basically, no — with one caveat I’ll get to later. And I suspect that the scare is at least partly about politics rather than economics. * https://www.nytimes.com/2009/05/29/opinion/29krugman.html https://www.nytimes.com/2009/05/29/opinion/29krugman.html The economic models said that the Fed should have decreased interest rates until they reached -6.7% (i.e., well below zero), but this that was impractical, the next-best thing was flood the market with cash equivalent, and that inflation would not appear: * https://krugman.blogs.nytimes.com/2009/11/16/the-madness-of-the-inflation-hawks/ https://krugman.blogs.nytimes.com/2009/11/16/the-madness-of-... > It seemed totally obvious to many people that with the Fed adding to the monetary base at breakneck speed, high inflation just had to be around the corner. That’s what history told us, right? > Except that those who knew their Hicks declared that this time was different, that in a liquidity trap the rise in the monetary base wouldn’t be inflationary at all (and that the relevant history was from Japan since the 1990s and from the 1930s, which seemed to confirm this claim). And so it proved, as shown by the red marker down at the bottom. * https://krugman.blogs.nytimes.com/2015/05/17/money-inflation-and-models/ https://krugman.blogs.nytimes.com/2015/05/17/money-inflation... > According to mainstream theory, among the characteristics of a liquidity trap are interest rates that are close to zero and changes in the money supply that fail to translate into changes in the price level.[2] * https://en.wikipedia.org/wiki/Liquidity_trap https://en.wikipedia.org/wiki/Liquidity_trap The [2] is a 1998 paper by Krugman talking about Japan. So ten years before the Great Recession there were already models on how to think about increasing M2 from other countries' experiences.

afterburner 7y ago
Exactly, thank you. It's also worth noting Keynesian economics was 70 years old in 2008. People willingly forgot this stuff to justify other political priorities.

Proziam 7y ago

The buying power of $1 USD has diminished massively over time and continues to do so. Every year the money in your wallet is worth at least 1.8% less. Over your lifetime that becomes a substantial loss in buying power.

luckydata 7y ago
1.8% is significantly below the targets those policies are pursuing. So printing money doesn't seem to be producing any (desired) increased inflation.
basementcat 7y ago
That is an example of monetary policy working exactly as intended. If the buying power of $1 USD didn’t diminish, there would be an incentive for people to hoard their wealth instead of investing and spending their wealth to build the economy.

shrewduser 7y ago

the US dollar was also in massive demand during 2008 as it is during every downturn or when risk goes up.