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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 meas
by 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 agoOkay, I'm out of my league here.
- tudorconstantin 5y agoAccording 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.
- Vadoff 5y agoM2 has grown at an average of 8.365% over the past 10 years, 7.063% over the past 20, 6.436% over the past 40, and 7.145% over the past 60. M2 is a much better gauge of inflation than the CPI (unless you're poor). At 7% inflation, holding USD means your value will decrease by nearly half every 10 years.
- james1071 5y agoNo, 'printing money' does not mean physically printing banknotes.