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An entire article about inflation in the US, and not a single word mentioning that 35% of all USD in existence have been printed in the last 10 months [1] Is t

by grecy 5y ago

An entire article about inflation in the US, and not a single word mentioning that 35% of all USD in existence have been printed in the last 10 months [1] Is there any world where you can print that much money and not devalue a currency? [1] https://www.reddit.com/r/CryptoCurrency/comments/kdpc24/35_of_all_us_dollars_in_existence_have_been/ https://www.reddit.com/r/CryptoCurrency/comments/kdpc24/35_o...

rsj_hn 5y ago
> 35% of all USD in existence have been printed in the last 10 months Yes, currency in circulation increased, which is exactly what you expect when deposit rates are basically zero. Now please explain why withdrawing some money from your bank account, which converts a deposit account into currency and causes "printing" of money (this is the only thing that can cause printing of money) is going to cause inflation? Seriously, I'd like to know. By this argument, if the US imposed a national teller fee that discouraged cash withdrawals, inflation should plummet, no? Why do central banks bother with interest rates when they have such a powerful inflation fighting mechanism at their disposal? At some point people need to understand that different assets are fungible. There is no difference between cash in your pocket, a money market mutual fund, a deposit account, or a sweeps account. Shifts in these from one to another may cause swings in M1, and they are the only possible cause of "printing" USD, but they don't cause any inflation.
- xupybd 5y ago
  When people say the Federal Reserve "prints money," they mean it's adding credit to its member banks' deposits. Federal Open Market Committee (FOMC) is the Fed’s operational arm, guiding monetary policy. It engages in expansive monetary policy when the Fed expands credit. It increases the money supply available to borrow, spend, or invest. Expanding credit helps to end recession Edit: Sorry please ignore me. I didn't know enough to understand the comment I was replying to.
  - avianlyric 5y ago
    OP is talking about the printing of M1 money specifically. Which is the creation of physical note, cheques and couple of other things. But basically it’s a measure of cash. You can look at the M1 supply in isolation because most money doesn’t exist in M1 because it doesn’t earn any interest. If you look at the M2 money supply, which is a superset including M1 cash, then you see there has been very little change. The reasonable conclusion then is the people have been withdrawing money from banks into cash, and liquidating other assets. So the total amount of money hasn’t increased, it’s just the amount of physical dollar bills that has increased, as digital money becomes physical. So GP has a good reason to be annoyed. OP has cast as interest, but otherwise inconsequential (from the perspective of inflation) fact as being the sole explanation of changes in inflation.
    - xupybd 5y ago
      Okay, I'm out of my league here.
    - tudorconstantin 5y ago
      According to this chart, "only" 22.5% of the M2 circulating USD supply wass created since the start of 2020: https://tradingeconomics.com/united-states/money-supply-m2#:~:text=Looking%20forward%2C%20we%20estimate%20Money,according%20to%20our%20econometric%20models https://tradingeconomics.com/united-states/money-supply-m2#:....
    - thereare5lights 5y ago
      > So the total amount of money hasn’t increased, it’s just the amount of physical dollar bills that has increased, as digital money becomes physical. Isn't this just splitting hairs? The amount of money actually circulating has increased then. Money that was previously just sitting in the bank, not circulating in the economy now is. Doesn't that have an impact on inflation? It might not be the sole explanation, but given the jump from 6.75 trillion to 18.4 trillion from Jan 2021 to Feb 2021 in the M1 money supply, it would seem odd if there wasn't any. And the salient point of GP was that this isn't even being discussed.
    - 5y ago
- makomk 5y ago
  When people say that "35% of all USD in existence have been printed in the last 10 months" and point at M1, they're not just talking about physical currency - that also includes money in people's bank accounts.
  - rsj_hn 5y ago
    Currency in circulation increased by roughly the amount cited over the last 10 months: https://fred.stlouisfed.org/series/CURRCIR https://fred.stlouisfed.org/series/CURRCIR USD is only printed when banks purchase cash from the Bureau of Engraving in order to meet expected outflows. That cash is purchased with reserves, which are obtained by selling some other asset or going short reserves. The point being, it is demand determined. If people want to hold more cash, they sell one form of cash-equivalent for another which forces the financial sector to adjust the asset side of their balance sheet as well. This cannot affect inflation. In terms of the growth of M1, there are two sources for this growth: 1. reclassification occuring in May 2020, when some MMF were added to the definition of M1. 2. increase in preference for cash holding. Neither can be inflationary.
    - CyanBird 5y ago
      > This cannot affect inflation. Increases in money velocity by definition increases inflation risk, this with increased preference to cash and localized liquidity as opposed to financial flows shows a potential increase in consumption and therefore money velocity This alongside Phillips curve suggests an increase in inflationary forces
      - rsj_hn 5y ago
        > Increases in money velocity by definition increases inflation risk OK, but that is just a tautology. What makes you think that caring less about cash versus deposit accounts in a zero rate world is the same thing as, or leads to, increases in money velocity? The last I checked, it is just as easy for me to spend money (and in fact, a bit easier) with one form of cash-equivalent as another, so why would transferring my balance out of a money market fund and into cash affect inflation at all? > This alongside Phillips curve suggests an increase in inflationary forces The phillips curve is notoriously unreliable. If you want to argue that deficit spending which pays people to not work will create a supply shortfall and thus increasing prices, I can get that. But that has nothing to do with these types of portfolio shifts.
- Kiro 5y ago
  So the simple narrative that the US is printing money to fund all these stimulus packages is false? Just trying to understand why this isn't debunked more if that's the case.
  - chii 5y ago
    > So the simple narrative that the US is printing money to fund all these stimulus packages is false? yes, it is false. The funding for these packages are done via lending - the US gov't borrows using treasury bonds, which is sold to whoever that wants to buy it (via banks as intermediaries).
  - james1071 5y ago
    It is exactly what is happening.
- colordrops 5y ago
  Wait, are you taking the word "printing" literally? If not, where did the money for the stimulus packages and bailouts come from?
- elevenoh 5y ago
  >Now please explain why withdrawing some money from your bank account, which converts a deposit account into currency and causes "printing" of money (this is the only thing that can cause printing of money) is going to cause inflation? Why do you go directly from OP's comment to this question? The market perception of downstream inflation arising from USD 'printing' is arguably the origin of price inflation. We've seen asset inflation (from real estate to crypto to commodities), now we're seeing price inflation follow. >Shifts in these from one to another may cause swings in M1, and they are the only possible cause of "printing" USD, but they don't cause any inflation. The US wasn't pulling from equity to print these funds, it was diluting the existing. This isn't a transfer from one asset to another.
  - XorNot 5y ago
    I find it baffling how you're managing to conclude it's inflation, and not market demand due to disrupted supply chains due to the pandemic. The effect of automobile availability due to the chip supply disruption has been well-covered on HN and elsewhere and is a pretty obvious guide post here.
- james1071 5y ago
  'Printing money' has nothing to do with printing bank notes.
rq1 5y ago
You mean without a “material” counterpart? US admins announced massive investment plans. There will be new goods available so you’ll need more monetary symbols in the market to stabilise prices. In theory.
deleted 5y ago
[deleted]
roenxi 5y ago
The technical reason is that devaluing a currency and inflation are defined by economists to be different phenomenon. A currency can devalue without any inflation being measured (eg, currency value drops 2%, productivity increases 2%, roughly 0% inflation and devaluation simultaneously). But you are right, 35% devaluations are large enough that it would be quite difficult to pull off without causing inflation. Especially when simultaneously the economy partially shuts down.
- midasuni 5y ago
  Which currency has the US been devalued by 35% against? Euro? Swiss frank? Japanese Yen? NZD? TWD?
  - roenxi 5y ago
    points at the gold price I mean, if you want to argue that the quantity of money goes up by 35% and the value is down just a little bit then it is unlikely you're going to convince me. It strains credulity. A lot of new dollars are being created.
    - throw0101a 5y ago
      The price of gold has been been on an upward trend since 2018: * https://fred.stlouisfed.org/series/GOLDAMGBD228NLBM https://fred.stlouisfed.org/series/GOLDAMGBD228NLBM It was on a downward trend from 2012-2014, and was mostly flat 2014-2018.
    - deleted 5y ago
      [deleted]
  - quickthrowman 5y ago
    It hasn’t devalued 35%, more like 10%. You’re pretty close on which currencies though. It has devalued against a basket of the first three currencies in your list, plus Euro, CAD, and Swedish krona: https://en.m.wikipedia.org/wiki/U.S._Dollar_Index https://en.m.wikipedia.org/wiki/U.S._Dollar_Index US Dollar Index chart: https://www.cnbc.com/quotes/.DXY https://www.cnbc.com/quotes/.DXY
throw0101a 5y ago
Do you understand what M1, the topic of the article, is? Do you understand what the accounting change regarding M1 was? * https://fredblog.stlouisfed.org/2021/01/whats-behind-the-recent-surge-in-the-m1-money-supply/ https://fredblog.stlouisfed.org/2021/01/whats-behind-the-rec...

by grecy 5y ago

rsj_hn 5y ago

> 35% of all USD in existence have been printed in the last 10 months Yes, currency in circulation increased, which is exactly what you expect when deposit rates are basically zero. Now please explain why withdrawing some money from your bank account, which converts a deposit account into currency and causes "printing" of money (this is the only thing that can cause printing of money) is going to cause inflation? Seriously, I'd like to know. By this argument, if the US imposed a national teller fee that discouraged cash withdrawals, inflation should plummet, no? Why do central banks bother with interest rates when they have such a powerful inflation fighting mechanism at their disposal? At some point people need to understand that different assets are fungible. There is no difference between cash in your pocket, a money market mutual fund, a deposit account, or a sweeps account. Shifts in these from one to another may cause swings in M1, and they are the only possible cause of "printing" USD, but they don't cause any inflation.

xupybd 5y ago
When people say the Federal Reserve "prints money," they mean it's adding credit to its member banks' deposits. Federal Open Market Committee (FOMC) is the Fed’s operational arm, guiding monetary policy. It engages in expansive monetary policy when the Fed expands credit. It increases the money supply available to borrow, spend, or invest. Expanding credit helps to end recession Edit: Sorry please ignore me. I didn't know enough to understand the comment I was replying to.
- avianlyric 5y ago
  OP is talking about the printing of M1 money specifically. Which is the creation of physical note, cheques and couple of other things. But basically it’s a measure of cash. You can look at the M1 supply in isolation because most money doesn’t exist in M1 because it doesn’t earn any interest. If you look at the M2 money supply, which is a superset including M1 cash, then you see there has been very little change. The reasonable conclusion then is the people have been withdrawing money from banks into cash, and liquidating other assets. So the total amount of money hasn’t increased, it’s just the amount of physical dollar bills that has increased, as digital money becomes physical. So GP has a good reason to be annoyed. OP has cast as interest, but otherwise inconsequential (from the perspective of inflation) fact as being the sole explanation of changes in inflation.
  - xupybd 5y ago
    Okay, I'm out of my league here.
  - tudorconstantin 5y ago
    According to this chart, "only" 22.5% of the M2 circulating USD supply wass created since the start of 2020: https://tradingeconomics.com/united-states/money-supply-m2#:~:text=Looking%20forward%2C%20we%20estimate%20Money,according%20to%20our%20econometric%20models https://tradingeconomics.com/united-states/money-supply-m2#:....
  - thereare5lights 5y ago
    > So the total amount of money hasn’t increased, it’s just the amount of physical dollar bills that has increased, as digital money becomes physical. Isn't this just splitting hairs? The amount of money actually circulating has increased then. Money that was previously just sitting in the bank, not circulating in the economy now is. Doesn't that have an impact on inflation? It might not be the sole explanation, but given the jump from 6.75 trillion to 18.4 trillion from Jan 2021 to Feb 2021 in the M1 money supply, it would seem odd if there wasn't any. And the salient point of GP was that this isn't even being discussed.
  - 5y ago
makomk 5y ago
When people say that "35% of all USD in existence have been printed in the last 10 months" and point at M1, they're not just talking about physical currency - that also includes money in people's bank accounts.
- rsj_hn 5y ago
  Currency in circulation increased by roughly the amount cited over the last 10 months: https://fred.stlouisfed.org/series/CURRCIR https://fred.stlouisfed.org/series/CURRCIR USD is only printed when banks purchase cash from the Bureau of Engraving in order to meet expected outflows. That cash is purchased with reserves, which are obtained by selling some other asset or going short reserves. The point being, it is demand determined. If people want to hold more cash, they sell one form of cash-equivalent for another which forces the financial sector to adjust the asset side of their balance sheet as well. This cannot affect inflation. In terms of the growth of M1, there are two sources for this growth: 1. reclassification occuring in May 2020, when some MMF were added to the definition of M1. 2. increase in preference for cash holding. Neither can be inflationary.
  - CyanBird 5y ago
    > This cannot affect inflation. Increases in money velocity by definition increases inflation risk, this with increased preference to cash and localized liquidity as opposed to financial flows shows a potential increase in consumption and therefore money velocity This alongside Phillips curve suggests an increase in inflationary forces
    - rsj_hn 5y ago
      > Increases in money velocity by definition increases inflation risk OK, but that is just a tautology. What makes you think that caring less about cash versus deposit accounts in a zero rate world is the same thing as, or leads to, increases in money velocity? The last I checked, it is just as easy for me to spend money (and in fact, a bit easier) with one form of cash-equivalent as another, so why would transferring my balance out of a money market fund and into cash affect inflation at all? > This alongside Phillips curve suggests an increase in inflationary forces The phillips curve is notoriously unreliable. If you want to argue that deficit spending which pays people to not work will create a supply shortfall and thus increasing prices, I can get that. But that has nothing to do with these types of portfolio shifts.
Kiro 5y ago
So the simple narrative that the US is printing money to fund all these stimulus packages is false? Just trying to understand why this isn't debunked more if that's the case.
- chii 5y ago
  > So the simple narrative that the US is printing money to fund all these stimulus packages is false? yes, it is false. The funding for these packages are done via lending - the US gov't borrows using treasury bonds, which is sold to whoever that wants to buy it (via banks as intermediaries).
- james1071 5y ago
  It is exactly what is happening.
colordrops 5y ago
Wait, are you taking the word "printing" literally? If not, where did the money for the stimulus packages and bailouts come from?
elevenoh 5y ago
>Now please explain why withdrawing some money from your bank account, which converts a deposit account into currency and causes "printing" of money (this is the only thing that can cause printing of money) is going to cause inflation? Why do you go directly from OP's comment to this question? The market perception of downstream inflation arising from USD 'printing' is arguably the origin of price inflation. We've seen asset inflation (from real estate to crypto to commodities), now we're seeing price inflation follow. >Shifts in these from one to another may cause swings in M1, and they are the only possible cause of "printing" USD, but they don't cause any inflation. The US wasn't pulling from equity to print these funds, it was diluting the existing. This isn't a transfer from one asset to another.
- XorNot 5y ago
  I find it baffling how you're managing to conclude it's inflation, and not market demand due to disrupted supply chains due to the pandemic. The effect of automobile availability due to the chip supply disruption has been well-covered on HN and elsewhere and is a pretty obvious guide post here.
james1071 5y ago
'Printing money' has nothing to do with printing bank notes.

rq1 5y ago

You mean without a “material” counterpart? US admins announced massive investment plans. There will be new goods available so you’ll need more monetary symbols in the market to stabilise prices. In theory.

deleted 5y ago

[deleted]

roenxi 5y ago

The technical reason is that devaluing a currency and inflation are defined by economists to be different phenomenon. A currency can devalue without any inflation being measured (eg, currency value drops 2%, productivity increases 2%, roughly 0% inflation and devaluation simultaneously). But you are right, 35% devaluations are large enough that it would be quite difficult to pull off without causing inflation. Especially when simultaneously the economy partially shuts down.

midasuni 5y ago
Which currency has the US been devalued by 35% against? Euro? Swiss frank? Japanese Yen? NZD? TWD?
- roenxi 5y ago
  points at the gold price I mean, if you want to argue that the quantity of money goes up by 35% and the value is down just a little bit then it is unlikely you're going to convince me. It strains credulity. A lot of new dollars are being created.
  - throw0101a 5y ago
    The price of gold has been been on an upward trend since 2018: * https://fred.stlouisfed.org/series/GOLDAMGBD228NLBM https://fred.stlouisfed.org/series/GOLDAMGBD228NLBM It was on a downward trend from 2012-2014, and was mostly flat 2014-2018.
  - deleted 5y ago
    [deleted]
- quickthrowman 5y ago
  It hasn’t devalued 35%, more like 10%. You’re pretty close on which currencies though. It has devalued against a basket of the first three currencies in your list, plus Euro, CAD, and Swedish krona: https://en.m.wikipedia.org/wiki/U.S._Dollar_Index https://en.m.wikipedia.org/wiki/U.S._Dollar_Index US Dollar Index chart: https://www.cnbc.com/quotes/.DXY https://www.cnbc.com/quotes/.DXY

throw0101a 5y ago

Do you understand what M1, the topic of the article, is? Do you understand what the accounting change regarding M1 was? * https://fredblog.stlouisfed.org/2021/01/whats-behind-the-recent-surge-in-the-m1-money-supply/ https://fredblog.stlouisfed.org/2021/01/whats-behind-the-rec...