6 ms·

20% of dollars in circulation were printed in 2020 and the inflation is filtering down. Also inflation statistics are intentionally blurred. Look at housing pri

by Grakel 5y ago

20% of dollars in circulation were printed in 2020 and the inflation is filtering down. Also inflation statistics are intentionally blurred. Look at housing prices or other individual metrics.

Retric 5y ago
M2 money supply doesn’t correspond very closely with inflation. https://www.longtermtrends.net/m2-money-supply-vs-inflation/ https://www.longtermtrends.net/m2-money-supply-vs-inflation/
- lend000 5y ago
  Your link doesn't support your conclusion. Growth in M2 clearly precedes increases in inflation by 1-3 years.
  - imtringued 5y ago
    Look at the second chart: "M2 Money Supply vs. CPI and GDP" 220x increase in the money supply vs 18x increase in CPI
    - lend000 5y ago
      Did you expect them to be the same, in order for there to be a causal effect?
      - Retric 5y ago
        I expect them to have some actual correlation over time for a causal effect look at say 1960 to 1970 and the graphs have nothing in common. Hell some peaks look years early others late but most don’t have anything to do with each other.
        lend000 5y ago
        Bretton Woods ended in 1973. Any time before then, the money supply was strongly impacted by the government's gold reserves. The only real anomaly in that chart is 2011, which is concealed by the fact that CPI is a terrible inflation metric when wealth inequality is changing (see the increase in equities and real estate during that period). For reference: CPI is based on a survey to see what median Americans are buying, the prices of those things, and how much of them they are buying. Naturally, people change their spending habits when prices rise to buy cheaper items, and this cancels out the how much of them they buy to end up with an effective metric of "how much are median Americans spending" (hint: basically all of their money). So CPI measures the median American's income, which is why there can never be any changes in "real wages" [0]. [0] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
        Retric 5y ago
        How about 1980 to 1986 where inflation tanked 90% and M2 started at 8% peaked at over 12% then fell back to 8%. The charts for those years have nothing in common. I get it, M2 really seems like it should correspond with inflation but at minimum you need to adjust for economic growth. As we produce and consume more we need more money handle those transactions.
        lend000 5y ago
        Recommend you take a look at this to see more factors involved in inflation, in a more quantitative light: https://www.lynalden.com/inflation/ https://www.lynalden.com/inflation/. The reason CPI is a terrible metric is because measuring inflation is very difficult and somewhat arbitrary (see for example: hedonic adjustments). M2 is a significant, consistent, and logical factor. Even from 1980-1986, rapid changes in M2 consistently correspond to a change in inflation. But there are other factors, like real economic growth, population growth, changes in size of the labor force and velocity of money.
        5y ago
finexplained 5y ago
Inflation isn't directly (that is one-to-one) tied to the amount of money printed. That's a simplistic view of a complicated phenomena. What matters is demand aggregated among many individuals. You can print any sum of money and if the person you give it to decides not to spend it, it doesn't affect demand and thus doesn't cause inflation. Meanwhile you can stop printing money, and if demand increases inflation can still occur.
- RhysU 5y ago
  But what if we handed the printed dollars to a large number of individuals to spend immediately to cover their income shortfalls in unprecedented government largess?
  - notJim 5y ago
    If it's covering an income shortfall, it doesn't seem like that would cause inflation. If I normally spend $2k a month, but then lose my job and get $2k from the government, that's not going to cause inflation. From what I understand, much of the stimulus money was saved. https://fred.stlouisfed.org/series/PSAVERT https://fred.stlouisfed.org/series/PSAVERT
    - willcipriano 5y ago
      > If I normally spend $2k a month, but then lose my job and get $2k from the government, that's not going to cause inflation. That $2k a month that you used to earn is still out there somewhere unaccounted for.
    - nly 5y ago
      Except the money you would have been paid previously still exists somewhere and will go somewhere else.
  - gizmo385 5y ago
    Then those people largely spend it on essentials, don't lose their housing, and don't starve to death.

by Grakel 5y ago

20% of dollars in circulation were printed in 2020 and the inflation is filtering down. Also inflation statistics are intentionally blurred. Look at housing prices or other individual metrics.

Retric 5y ago

M2 money supply doesn’t correspond very closely with inflation. https://www.longtermtrends.net/m2-money-supply-vs-inflation/ https://www.longtermtrends.net/m2-money-supply-vs-inflation/

lend000 5y ago
Your link doesn't support your conclusion. Growth in M2 clearly precedes increases in inflation by 1-3 years.
- imtringued 5y ago
  Look at the second chart: "M2 Money Supply vs. CPI and GDP" 220x increase in the money supply vs 18x increase in CPI
  - lend000 5y ago
    Did you expect them to be the same, in order for there to be a causal effect?
    - Retric 5y ago
      I expect them to have some actual correlation over time for a causal effect look at say 1960 to 1970 and the graphs have nothing in common. Hell some peaks look years early others late but most don’t have anything to do with each other.
      - lend000 5y ago
        Bretton Woods ended in 1973. Any time before then, the money supply was strongly impacted by the government's gold reserves. The only real anomaly in that chart is 2011, which is concealed by the fact that CPI is a terrible inflation metric when wealth inequality is changing (see the increase in equities and real estate during that period). For reference: CPI is based on a survey to see what median Americans are buying, the prices of those things, and how much of them they are buying. Naturally, people change their spending habits when prices rise to buy cheaper items, and this cancels out the how much of them they buy to end up with an effective metric of "how much are median Americans spending" (hint: basically all of their money). So CPI measures the median American's income, which is why there can never be any changes in "real wages" [0]. [0] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
        Retric 5y ago
        How about 1980 to 1986 where inflation tanked 90% and M2 started at 8% peaked at over 12% then fell back to 8%. The charts for those years have nothing in common. I get it, M2 really seems like it should correspond with inflation but at minimum you need to adjust for economic growth. As we produce and consume more we need more money handle those transactions.
        lend000 5y ago
        Recommend you take a look at this to see more factors involved in inflation, in a more quantitative light: https://www.lynalden.com/inflation/ https://www.lynalden.com/inflation/. The reason CPI is a terrible metric is because measuring inflation is very difficult and somewhat arbitrary (see for example: hedonic adjustments). M2 is a significant, consistent, and logical factor. Even from 1980-1986, rapid changes in M2 consistently correspond to a change in inflation. But there are other factors, like real economic growth, population growth, changes in size of the labor force and velocity of money.
        5y ago

finexplained 5y ago

Inflation isn't directly (that is one-to-one) tied to the amount of money printed. That's a simplistic view of a complicated phenomena. What matters is demand aggregated among many individuals. You can print any sum of money and if the person you give it to decides not to spend it, it doesn't affect demand and thus doesn't cause inflation. Meanwhile you can stop printing money, and if demand increases inflation can still occur.

RhysU 5y ago
But what if we handed the printed dollars to a large number of individuals to spend immediately to cover their income shortfalls in unprecedented government largess?
- notJim 5y ago
  If it's covering an income shortfall, it doesn't seem like that would cause inflation. If I normally spend $2k a month, but then lose my job and get $2k from the government, that's not going to cause inflation. From what I understand, much of the stimulus money was saved. https://fred.stlouisfed.org/series/PSAVERT https://fred.stlouisfed.org/series/PSAVERT
  - willcipriano 5y ago
    > If I normally spend $2k a month, but then lose my job and get $2k from the government, that's not going to cause inflation. That $2k a month that you used to earn is still out there somewhere unaccounted for.
  - nly 5y ago
    Except the money you would have been paid previously still exists somewhere and will go somewhere else.
- gizmo385 5y ago
  Then those people largely spend it on essentials, don't lose their housing, and don't starve to death.