Cantillion Effect[0], see my earlier post. If you print money by lowering the interest rate, the new money is created by credit worthy people, who go on to buy

Cantillion Effect[0], see my earlier post. If you print money by lowering the interest rate, the new money is created by credit worthy people, who go on to buy assets, so you see no increase in consumption demand, so there is no inflation. If you print money and give it to the average person, you will see consumption demand rise. But that first effect is temporary. When you lower the interest rate, you are storing inflation, and using my previous posts analogy, by trapping it behind a dam. That money still exists, and given a supply shock, that dam will be opened. But it wasn't the supply shock that caused the inflation, it was always the creation of the new money in the first place. So Milton is correct. If the weathy did not have wealth stored, they could not use that wealth, and you would have no inflation. So this year we see a combination of three effects. 1. Less people working, so the average wage goes up. (The people not working retired, as their stock was up by enough, so they are still spending.) This allows the average person to have more money, which they will spend. 2. Governments have given money - and more importantly to the average person - have suspended student loan payments. This means people can spend more of what they earn. 3. Supply shock on goods caused by CO-VID and caused by inefficiencies of the Supply Chain caused by the increased demand and the switch from service economy to more stuff. You'll note that unlike 1971 or Weimar, none of this is exponential. When we reach an equilibrium point, peoples wages will level out, and peoples wages might rise back to the level they were in 1971, but the system will be stable. So the Fed is correct, it's transitory, but that transition might be longer and bigger than they expected. That is, until they raise rates next year. [0]: https://news.ycombinator.com/item?id=25646585 https://news.ycombinator.com/item?id=25646585