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Isn't it obvious this will lead to hyperinflation? I am BAFFLED why this isn't being reported on cnn or whatever. All I see is corona virus. The sad thing is is

Isn't it obvious this will lead to hyperinflation? I am BAFFLED why this isn't being reported on cnn or whatever. All I see is corona virus. The sad thing is is that there will probably be more lives lost to hyperinflation than covid-19.

AngrySkillzz 7y ago
No, it is not at all obvious. Read up on the papers written about QE after the 2008 crisis. Monetary base increases significantly but the money multiplier falls in tandem. The net effect is that the price level is not strongly impacted by this type of program, outside of pre-empting deflation by providing liquidity to counter a potential fall in economic activity due to seizing credit markets. See also "banks don't lend out reserves." The linkage from "cash" (i.e. bank reserves) to the market price level of goods is not very strong.
jdhn 7y ago
>Isn't it obvious this will lead to hyperinflation? I thought that QE was going to lead to a lot of inflation, and it hasn't seemed to. If inflation has shown up anywhere, it's been in the stock market and housing prices due to low interest rates. Even then, I'm hesitant to say that it's primarily responsible for the rise in housing prices because I think demand from my generation (millenials) is helping to cause the sharp spike in markets such as NYC LA, Atlanta, etc.
- dragonwriter 7y ago
  > I thought that QE was going to lead to a lot of inflation, and it hasn't seemed to. A major point of QE was to lead to significant inflation compared to not adopting the policy; without it, the projections were that significant deflation would occur. So, it netted to very low but positive inflation, as intended. > Even then, I'm hesitant to say that it's primarily responsible for the rise in housing prices because I think demand from my generation (millenials) is helping to cause the sharp spike in markets such as NYC LA, Atlanta, etc. There's no spike, just a smooth continuation of a trend that has existed during most economic expansions (and even some recessions) since at least when Gen X were children. See, e.g., https://fred.stlouisfed.org/series/NYSTHPI https://fred.stlouisfed.org/series/NYSTHPI
OscarCunningham 7y ago
Similar lending happened in 2008 and inflation fell to -1% in 2009.
dragonwriter 7y ago
> Isn't it obvious this will lead to hyperinflation? No, because this kind of thing has been done before without hyperinflation. What you are ignoring is what the expected inflation/deflation course would be without the policy.
icu 7y ago
Inflation happens when you increase money supply and have velocity of money. With the global lockdown, you're not taking into account the demand and supply curve will shift down to a new lower price equilibrium. In other words, in the short term I think there will either be deflation, or no change to inflation (due to all the money printing). The question will be what will happen once the global lockdown is lifted, and how quickly the velocity of money picks up. There might very well be high inflation or hyperinflation in certain things, but not in others (due to how quickly global supply chains are repaired and how substitutable certain products are. In 2008 the money was given to the banks (to recapitalise them) and then transmitted to financial assets due to the search for yield. This meant that the velocity of the new money was very low, which is why there wasn't high levels of inflation. If there is MMT or helicopter money, we could very well see high levels of velocity and inflation.
batterseapower 7y ago
Market inflation expectations are below where they were at the start of the crisis: https://fred.stlouisfed.org/series/T10YIE https://fred.stlouisfed.org/series/T10YIE

AngrySkillzz 7y ago

No, it is not at all obvious. Read up on the papers written about QE after the 2008 crisis. Monetary base increases significantly but the money multiplier falls in tandem. The net effect is that the price level is not strongly impacted by this type of program, outside of pre-empting deflation by providing liquidity to counter a potential fall in economic activity due to seizing credit markets. See also "banks don't lend out reserves." The linkage from "cash" (i.e. bank reserves) to the market price level of goods is not very strong.

jdhn 7y ago

>Isn't it obvious this will lead to hyperinflation? I thought that QE was going to lead to a lot of inflation, and it hasn't seemed to. If inflation has shown up anywhere, it's been in the stock market and housing prices due to low interest rates. Even then, I'm hesitant to say that it's primarily responsible for the rise in housing prices because I think demand from my generation (millenials) is helping to cause the sharp spike in markets such as NYC LA, Atlanta, etc.

dragonwriter 7y ago
> I thought that QE was going to lead to a lot of inflation, and it hasn't seemed to. A major point of QE was to lead to significant inflation compared to not adopting the policy; without it, the projections were that significant deflation would occur. So, it netted to very low but positive inflation, as intended. > Even then, I'm hesitant to say that it's primarily responsible for the rise in housing prices because I think demand from my generation (millenials) is helping to cause the sharp spike in markets such as NYC LA, Atlanta, etc. There's no spike, just a smooth continuation of a trend that has existed during most economic expansions (and even some recessions) since at least when Gen X were children. See, e.g., https://fred.stlouisfed.org/series/NYSTHPI https://fred.stlouisfed.org/series/NYSTHPI

OscarCunningham 7y ago

Similar lending happened in 2008 and inflation fell to -1% in 2009.

dragonwriter 7y ago

> Isn't it obvious this will lead to hyperinflation? No, because this kind of thing has been done before without hyperinflation. What you are ignoring is what the expected inflation/deflation course would be without the policy.

icu 7y ago

Inflation happens when you increase money supply and have velocity of money. With the global lockdown, you're not taking into account the demand and supply curve will shift down to a new lower price equilibrium. In other words, in the short term I think there will either be deflation, or no change to inflation (due to all the money printing). The question will be what will happen once the global lockdown is lifted, and how quickly the velocity of money picks up. There might very well be high inflation or hyperinflation in certain things, but not in others (due to how quickly global supply chains are repaired and how substitutable certain products are. In 2008 the money was given to the banks (to recapitalise them) and then transmitted to financial assets due to the search for yield. This meant that the velocity of the new money was very low, which is why there wasn't high levels of inflation. If there is MMT or helicopter money, we could very well see high levels of velocity and inflation.

batterseapower 7y ago

Market inflation expectations are below where they were at the start of the crisis: https://fred.stlouisfed.org/series/T10YIE https://fred.stlouisfed.org/series/T10YIE