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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 char

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.
  - Retric 5y ago
    Look I am aware of a host of factors that in theory influence inflation and the multiple different ways it’s measured. I am also perfectly willing to acknowledge there is a connection between M2 and inflation. But, when historical correlations are this weak you can’t suggest A predicts B when it simply hasn’t.
    - lend000 5y ago
      Not everyone has an eye for data, but this is a pretty clear correlation (time delayed, of course) as far as real world macroeconomic signals go. Contrary to your claim, significant increases in M2 have historically predicted increases in inflation with high probability for over 50 years, even without controlling for other factors. And all the people predicting decade-high inflation and asset inflation since last year have been right so far.
      - Retric 5y ago
        > as far as real world macroeconomic signals go That’s some serious weasel wording right there. Either a model fits real world data or it doesn’t, ignoring all those times a model failed isn’t an eye for data it’s a delusion. > And all the people predicting decade-high inflation and asset inflation since last year have been right so far. That’s little different from walking into a room full of broken clocks picking those that are currently accurate and suggesting they must be working fine. If you select for people who accurately predicted the last year you then need to look at their predictions of every prior year.

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.
- Retric 5y ago
  Look I am aware of a host of factors that in theory influence inflation and the multiple different ways it’s measured. I am also perfectly willing to acknowledge there is a connection between M2 and inflation. But, when historical correlations are this weak you can’t suggest A predicts B when it simply hasn’t.
  - lend000 5y ago
    Not everyone has an eye for data, but this is a pretty clear correlation (time delayed, of course) as far as real world macroeconomic signals go. Contrary to your claim, significant increases in M2 have historically predicted increases in inflation with high probability for over 50 years, even without controlling for other factors. And all the people predicting decade-high inflation and asset inflation since last year have been right so far.
    - Retric 5y ago
      > as far as real world macroeconomic signals go That’s some serious weasel wording right there. Either a model fits real world data or it doesn’t, ignoring all those times a model failed isn’t an eye for data it’s a delusion. > And all the people predicting decade-high inflation and asset inflation since last year have been right so far. That’s little different from walking into a room full of broken clocks picking those that are currently accurate and suggesting they must be working fine. If you select for people who accurately predicted the last year you then need to look at their predictions of every prior year.