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The main issue with this post is that it talks about underlying "monetary inflation" which underpins the other types of inflation including consumer inflation.

The main issue with this post is that it talks about underlying "monetary inflation" which underpins the other types of inflation including consumer inflation. The consumer inflation we have currently is due to increase in prices of raw materials and not necessarily due to printing money but due to labor issues. Japan had QE with money printing for close to 40 years now and stagnation, not inflation is their problem. Major currencies, including USD, are no longer pegged to gold since the 80s so all studies prior to that are no longer relevant for inflation. And currencies like USD have virtually unlimited appetite. If the central bank prints out one trillion dollars it will be taken up by couple of Bezos & Zuckerbergs. if anything, the whole pandemic is a good case study for Universal Basic Income.

anm89 5y ago
>The consumer inflation we have currently due to increase in prices of raw materials and not necessarily due to printing money You seem to be implying that these are two unrelated phenomenon. I would say that claim goes against almost every school of economic thought I am aware of. The idea that printing money just moves prices up directly as if by magic is not a claim I've ever heard and that almost certainly is not what Lyn is claiming. Increasing prices of raw materials is one of the most base cases in terms of potential effects of printing a ton of money (increased demand chasing a fixed supply). So I would say the idea that inflation is either due to input price increases or printing money is a completely false dichotomy.
- ganeshkrishnan 5y ago
  >You seem to be implying that these are two unrelated phenomenon. All I am saying is that printing USD has almost no effect on inflation especially since money nowadays inherently has no value after being de-coupled from gold. Maybe if everyone across the word suddenly got $1 million dollars, we could be seeing inflation. I believe that as long as people spend their money to buy goods without saving up (debt of a country)and economic outputs remains consistent, printing money does not necessarily cause inflation. I am interested to know if printing excessive money in a functioning economy ever caused inflation after the 70s, to be proven otherwise.
  - nostrademons 5y ago
    Zimbabwe money supply + inflation: https://static.seekingalpha.com/uploads/2012/7/14/426795-13422563628257763-Economics-Fanatic.png https://static.seekingalpha.com/uploads/2012/7/14/426795-134... Venezuela money supply: http://fingfx.thomsonreuters.com/gfx/rngs/VENEZUELA-ECONOMY/010040800HY/images/share-card.png http://fingfx.thomsonreuters.com/gfx/rngs/VENEZUELA-ECONOMY/... Venezuela inflation rate: https://i.insider.com/5b368d86ce37b21c008b4892?width=600&format=jpeg&auto=webp https://i.insider.com/5b368d86ce37b21c008b4892?width=600&for... 1990s Russia inflation rate and money supply, in table form: https://www.sjsu.edu/faculty/watkins/russianinfl.htm https://www.sjsu.edu/faculty/watkins/russianinfl.htm
- ivalm 5y ago
  Printing money can increase prices on raw material but in current case disruption in supply chains (that was caused by the pandemic) is a much more likely reason.
  - nostrademons 5y ago
    This is not an either/or. You need both an increase in the monetary base and a supply-shock catalyst to get significant inflation. Loose monetary policy is like leaving the gas on. A supply shock is like lighting a match. Both of them together makes things go boom.
    - ivalm 5y ago
      It’s unclear that this is happening. There is a good argument that what we are seeing is basis effect + pent up demand and has literally nothing to do with monetary policy. This is why the consensus for now is that current inflation is transitory.
      - nostrademons 5y ago
        We know that there are supply shocks - chips, lumber, commodities, appliances, labor have all been in the news lately. We also know that monetary base is increasing rapidly: https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL I wouldn't say there is any consensus at all, but that's why we have capital markets. If you believe price levels are going back down and we'll return to normal you are free to take the other side of the trade from me.
        ivalm 5y ago
        > If you believe price levels are going back down and we'll return to normal you are free to take the other side of the trade from me That’s not what people mean when they say inflation is “transitory”, they mean inflation will be high now (prices will rise) and will be low later (so prices will not continue rising). I don’t think people think there will be deflation (prices return to old ones).
RhodoGSA 5y ago
>if anything, the whole pandemic is a good case study for Universal Basic Income. What, everyone would sit at home, do nothing while debt to GDP rises dramatically?
neilwilson 5y ago
"Japan had QE with money printing for close to 40 years now" All sovereign nations "money print" to pay bills. All bills, all the time. That's how the accounting works. It's not a relevant issue. And that causes a cascade process of spending, which becomes somebody else's income less tax. Over a series of hops (transactions) that spending all disappears in tax - whatever the tax rate. The question is how many transactions that takes, and whether the economy can undertake this transactions (and you can work that out by looking at the number of people without work that want it). Tax rates change the amount of transactions in the hops. Beyond that it is down to whether everybody spends everything they get the instant they get it. If they don't and they 'save', then that automatically causes a 'deficit'. That saving/deficit combo then attracts an interest rate. QE does nothing other than alter the interest rate the saving/deficit combo attracts. It seems strange that people get excited about levels of saving. Isn't that a good thing?

anm89 5y ago

>The consumer inflation we have currently due to increase in prices of raw materials and not necessarily due to printing money You seem to be implying that these are two unrelated phenomenon. I would say that claim goes against almost every school of economic thought I am aware of. The idea that printing money just moves prices up directly as if by magic is not a claim I've ever heard and that almost certainly is not what Lyn is claiming. Increasing prices of raw materials is one of the most base cases in terms of potential effects of printing a ton of money (increased demand chasing a fixed supply). So I would say the idea that inflation is either due to input price increases or printing money is a completely false dichotomy.

ganeshkrishnan 5y ago
>You seem to be implying that these are two unrelated phenomenon. All I am saying is that printing USD has almost no effect on inflation especially since money nowadays inherently has no value after being de-coupled from gold. Maybe if everyone across the word suddenly got $1 million dollars, we could be seeing inflation. I believe that as long as people spend their money to buy goods without saving up (debt of a country)and economic outputs remains consistent, printing money does not necessarily cause inflation. I am interested to know if printing excessive money in a functioning economy ever caused inflation after the 70s, to be proven otherwise.
- nostrademons 5y ago
  Zimbabwe money supply + inflation: https://static.seekingalpha.com/uploads/2012/7/14/426795-13422563628257763-Economics-Fanatic.png https://static.seekingalpha.com/uploads/2012/7/14/426795-134... Venezuela money supply: http://fingfx.thomsonreuters.com/gfx/rngs/VENEZUELA-ECONOMY/010040800HY/images/share-card.png http://fingfx.thomsonreuters.com/gfx/rngs/VENEZUELA-ECONOMY/... Venezuela inflation rate: https://i.insider.com/5b368d86ce37b21c008b4892?width=600&format=jpeg&auto=webp https://i.insider.com/5b368d86ce37b21c008b4892?width=600&for... 1990s Russia inflation rate and money supply, in table form: https://www.sjsu.edu/faculty/watkins/russianinfl.htm https://www.sjsu.edu/faculty/watkins/russianinfl.htm
ivalm 5y ago
Printing money can increase prices on raw material but in current case disruption in supply chains (that was caused by the pandemic) is a much more likely reason.
- nostrademons 5y ago
  This is not an either/or. You need both an increase in the monetary base and a supply-shock catalyst to get significant inflation. Loose monetary policy is like leaving the gas on. A supply shock is like lighting a match. Both of them together makes things go boom.
  - ivalm 5y ago
    It’s unclear that this is happening. There is a good argument that what we are seeing is basis effect + pent up demand and has literally nothing to do with monetary policy. This is why the consensus for now is that current inflation is transitory.
    - nostrademons 5y ago
      We know that there are supply shocks - chips, lumber, commodities, appliances, labor have all been in the news lately. We also know that monetary base is increasing rapidly: https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL I wouldn't say there is any consensus at all, but that's why we have capital markets. If you believe price levels are going back down and we'll return to normal you are free to take the other side of the trade from me.
      - ivalm 5y ago
        > If you believe price levels are going back down and we'll return to normal you are free to take the other side of the trade from me That’s not what people mean when they say inflation is “transitory”, they mean inflation will be high now (prices will rise) and will be low later (so prices will not continue rising). I don’t think people think there will be deflation (prices return to old ones).

RhodoGSA 5y ago

>if anything, the whole pandemic is a good case study for Universal Basic Income. What, everyone would sit at home, do nothing while debt to GDP rises dramatically?

neilwilson 5y ago

"Japan had QE with money printing for close to 40 years now" All sovereign nations "money print" to pay bills. All bills, all the time. That's how the accounting works. It's not a relevant issue. And that causes a cascade process of spending, which becomes somebody else's income less tax. Over a series of hops (transactions) that spending all disappears in tax - whatever the tax rate. The question is how many transactions that takes, and whether the economy can undertake this transactions (and you can work that out by looking at the number of people without work that want it). Tax rates change the amount of transactions in the hops. Beyond that it is down to whether everybody spends everything they get the instant they get it. If they don't and they 'save', then that automatically causes a 'deficit'. That saving/deficit combo then attracts an interest rate. QE does nothing other than alter the interest rate the saving/deficit combo attracts. It seems strange that people get excited about levels of saving. Isn't that a good thing?