4 ms·

Source of US Inflation

nabla9 5y ago
According to the OP theory the current inflation is caused by simple change in statistical method used to calculate M2 The reason for the jump is explained in below the graph >Before May 2020, M2 consists of M1 plus (1) savings deposits (including money market deposit accounts); (2) small-denomination time deposits (time deposits in amounts of less than $100,000) less individual retirement account (IRA) and Keogh balances at depository institutions; and (3) balances in retail money market funds (MMFs) less IRA and Keogh balances at MMFs. >Beginning May 2020, M2 consists of M1 plus (1) small-denomination time deposits (time deposits in amounts of less than $100,000) less IRA and Keogh balances at depository institutions; and (2) balances in retail MMFs less IRA and Keogh balances at MMFs. Seasonally adjusted M2 is constructed by summing savings deposits (before May 2020), small-denomination time deposits, and retail MMFs, each seasonally adjusted separately, and adding this result to seasonally adjusted M1. That's highly orthodox, I would call it even weird theory. ps. Friedman's claim that inflation is a monetary phenomenon is now considered false (or at least highly conditional) https://www.jstor.org/stable/3441104 https://www.jstor.org/stable/3441104 >The relation between long-run inflation and the money growth rate is not proportional. The strong link between inflation and money growth is almost wholly due to the presence of high- (or hyper-) inflation countries in the sample. The relationship between inflation and money growth for low-inflation countries (on average less than 10% per annum over the last 30 years) is weak. https://fred.stlouisfed.org/graph/fredgraph.png?g=K70a https://fred.stlouisfed.org/graph/fredgraph.png?g=K70a
- hindsightbias 5y ago
  “ ps. Friedman's claim that inflation is a monetary phenomenon is now considered false” How do libertarians square that circle today? What did Friedman say about pandemics and supply chain?

According to the OP theory the current inflation is caused by simple change in statistical method used to calculate M2 The reason for the jump is explained in below the graph >Before May 2020, M2 consists of M1 plus (1) savings deposits (including money market deposit accounts); (2) small-denomination time deposits (time deposits in amounts of less than $100,000) less individual retirement account (IRA) and Keogh balances at depository institutions; and (3) balances in retail money market funds (MMFs) less IRA and Keogh balances at MMFs. >Beginning May 2020, M2 consists of M1 plus (1) small-denomination time deposits (time deposits in amounts of less than $100,000) less IRA and Keogh balances at depository institutions; and (2) balances in retail MMFs less IRA and Keogh balances at MMFs. Seasonally adjusted M2 is constructed by summing savings deposits (before May 2020), small-denomination time deposits, and retail MMFs, each seasonally adjusted separately, and adding this result to seasonally adjusted M1. That's highly orthodox, I would call it even weird theory. ps. Friedman's claim that inflation is a monetary phenomenon is now considered false (or at least highly conditional) https://www.jstor.org/stable/3441104 https://www.jstor.org/stable/3441104 >The relation between long-run inflation and the money growth rate is not proportional. The strong link between inflation and money growth is almost wholly due to the presence of high- (or hyper-) inflation countries in the sample. The relationship between inflation and money growth for low-inflation countries (on average less than 10% per annum over the last 30 years) is weak. https://fred.stlouisfed.org/graph/fredgraph.png?g=K70a https://fred.stlouisfed.org/graph/fredgraph.png?g=K70a

hindsightbias 5y ago
“ ps. Friedman's claim that inflation is a monetary phenomenon is now considered false” How do libertarians square that circle today? What did Friedman say about pandemics and supply chain?