5 ms·

It's a drop relative to what it would be if the money supply had not increased accordingly, not versus what the purchasing power was at that point in time.

rory 5y ago
No, again that's simply not correct. We can empirically observe purchasing power and money supply, so there's no need to speculate. One-time changes to M2 of that magnitude have been shown to have small to no effect on inflation [0]. [0] https://www.commonfund.org/blog/chart-of-the-month-money-supply-and-inflation https://www.commonfund.org/blog/chart-of-the-month-money-sup...
- quantumBerry 5y ago
  Your own article admits that the lack of inflation is due to other factors such as reduced lending and velocity of money. All else equal if there were 40 rubles in the economy yesterday and 80 tomorrow, your rubles have half the purchasing power they had before. The printing of the money prevented a deflationary effect that would have enrichened those who held onto dollars under a period of anemic lending and lowered velocity of money. So yeah, it really is a drop relative to what the value would have been if new money had not been printed. "For excess liquidity to create inflation, it needs to lead to a sustained increase in spending and loan growth. So far, bank lending has been anemic while the global velocity of money and the money multiplier (the ratio of broad money to base money) has fallen more than during the Great Financial Crisis. " "the secular trends of automation and robotization, declining labor force participation, aging population and high debt levels will continue to suppress inflation over the long-term"
  - rory 5y ago
    Sorry, but "all else equal" doesn't, and can never, exist. Any way to expand M2 itself changes the velocity of money, inflation expectations, and (probably most importantly) the expected future value of the US economy. Your claim was: > It's a drop relative to what it would be if the money supply had not increased accordingly If the money supply hadn't increased, those secondary effects would not have happened, so any idea that M2 maps linearly to inflation net unrelated climate effects is just incorrect. If you still believe it's true after that explanation, please back the claim with some actual information.
    - quantumBerry 5y ago
      >If the money supply hadn't increased, those secondary effects would not have happened I can't tell if this is supposed to be sarcasm, humor, or merely a hilariously misinformed view of the effect of the pandemic on spending and lending behavior (which apparently you think happened instead due to the change in money supply). >Sorry, but "all else equal" doesn't, and can never, exist. Which is my point! As your paper explains, these secondary effects from pandemic and other causes help explain the expression of inflation beyond the money supply effects.
- dmichulke 5y ago
  The post talks about inflation but doesn't mention which measure it uses. Hmmm... Also, the correlation coefficient 0.15 and an R^2 of 0.02. It means it doesn't explain all variance in the inflation but it clearly influences it. Finally, your last comments sounds like we actually can have a free lunch.
  - rory 5y ago
    "It doesn't explain all the variance" is very a generous way to say "it explains one seventh of the variance". And re: free lunch-- keep in mind that empirical reality isn't affected by our internal sense of fairness. It is possible that we will find free lunches in our existence. Nuclear energy is arguably a kind of free lunch. That said, my last comment was specifically contrasting more sustained M2 expansion, or an expansion of a higher order of magnitude. We don't know exactly what would happen then, but there's a decent possibility of high inflation in that case.
  - rory 5y ago
    Oh and it's plain CPI btw. I agree Ivo should have mentioned that.

rory 5y ago

No, again that's simply not correct. We can empirically observe purchasing power and money supply, so there's no need to speculate. One-time changes to M2 of that magnitude have been shown to have small to no effect on inflation [0]. [0] https://www.commonfund.org/blog/chart-of-the-month-money-supply-and-inflation https://www.commonfund.org/blog/chart-of-the-month-money-sup...

quantumBerry 5y ago
Your own article admits that the lack of inflation is due to other factors such as reduced lending and velocity of money. All else equal if there were 40 rubles in the economy yesterday and 80 tomorrow, your rubles have half the purchasing power they had before. The printing of the money prevented a deflationary effect that would have enrichened those who held onto dollars under a period of anemic lending and lowered velocity of money. So yeah, it really is a drop relative to what the value would have been if new money had not been printed. "For excess liquidity to create inflation, it needs to lead to a sustained increase in spending and loan growth. So far, bank lending has been anemic while the global velocity of money and the money multiplier (the ratio of broad money to base money) has fallen more than during the Great Financial Crisis. " "the secular trends of automation and robotization, declining labor force participation, aging population and high debt levels will continue to suppress inflation over the long-term"
- rory 5y ago
  Sorry, but "all else equal" doesn't, and can never, exist. Any way to expand M2 itself changes the velocity of money, inflation expectations, and (probably most importantly) the expected future value of the US economy. Your claim was: > It's a drop relative to what it would be if the money supply had not increased accordingly If the money supply hadn't increased, those secondary effects would not have happened, so any idea that M2 maps linearly to inflation net unrelated climate effects is just incorrect. If you still believe it's true after that explanation, please back the claim with some actual information.
  - quantumBerry 5y ago
    >If the money supply hadn't increased, those secondary effects would not have happened I can't tell if this is supposed to be sarcasm, humor, or merely a hilariously misinformed view of the effect of the pandemic on spending and lending behavior (which apparently you think happened instead due to the change in money supply). >Sorry, but "all else equal" doesn't, and can never, exist. Which is my point! As your paper explains, these secondary effects from pandemic and other causes help explain the expression of inflation beyond the money supply effects.
dmichulke 5y ago
The post talks about inflation but doesn't mention which measure it uses. Hmmm... Also, the correlation coefficient 0.15 and an R^2 of 0.02. It means it doesn't explain all variance in the inflation but it clearly influences it. Finally, your last comments sounds like we actually can have a free lunch.
- rory 5y ago
  "It doesn't explain all the variance" is very a generous way to say "it explains one seventh of the variance". And re: free lunch-- keep in mind that empirical reality isn't affected by our internal sense of fairness. It is possible that we will find free lunches in our existence. Nuclear energy is arguably a kind of free lunch. That said, my last comment was specifically contrasting more sustained M2 expansion, or an expansion of a higher order of magnitude. We don't know exactly what would happen then, but there's a decent possibility of high inflation in that case.
- rory 5y ago
  Oh and it's plain CPI btw. I agree Ivo should have mentioned that.