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Is there any explanation for why previous stimulus during Obama administration didn't cause inflation. Lots of my friends are convinced that printing money doen

Is there any explanation for why previous stimulus during Obama administration didn't cause inflation. Lots of my friends are convinced that printing money doens't necessarily cause inflation and use that an example to support their case.

wskinner 5y ago
The quantity of the printing was far lower during the Obama presidency.
- svachalek 5y ago
  Far, far lower. We're so casually throwing around plans priced in the trillions these days, when just a few years ago people thought billions of dollars was a lot of money.
dragonwriter 5y ago
> Is there any explanation for why previous stimulus during Obama administration didn't cause inflation It did, compared to what would have existed without the stimulus. But the underlying economic problem it addressed wasn't like the pandemic and the control measures directed at it, particularly in the rapidity with which things could spring back from it. What caused visible inflation wasn't the stimulus, but the rapid rebound in the underlying economy, which wasn't a direct product of the stimulus, though the stimulus mitigated second-order damage that might have prevented the rebound. The slower emergence from the conditions prompting the Obama-era stimulus meant that slowly-tapering monetary response could buffer most net inflation effects.
throwawaycities 5y ago
The 2008 bailouts spanned both the Bush and Obama administrations, we can even round them up to $1T each for a total of $2T. Keep in mind those 2 bailouts took the economy from near failure to the longest bull run in history. The size of the bailouts - excuse me stimulus packages - in the last 2 years make 2008 look like a joke in comparison, and it looks like every few months a new “stimulus” will be passed that is larger than any 1 of the 2008 bailouts.
somethoughts 5y ago
My back of the envelope thought is that the majority of the QE given out during the 2008 financial crisis was given out via the banks who then proceeded to lend/hand it out to Fortune 500 type corporations to keep them (and the banks) from collapsing. The stuff that got inflated/propped up were "assets" that wealthy corporations and individuals buy (i.e. risky VC startups, stocks, bonds, income property such as single family rental homes) - which is not stuff tracked by CPI. In the Covid pandemic most of the QE stimulus was to enable low interest debt in order to allow Congress to give it out to "the people" via government stimulus checks. "The people" then proceeded to buy stuff that normal people buy - i.e. consumer staples/discretionary goods which is stuff tracked by CPI.
- sjg007 5y ago
  The majority of the covid money went to the Paycheck protection act and the terms where so opaque that the rich got a lot richer. The peanuts handed out in direct relief was and is a non-issue except that supply chains shut down because of lock downs and reduced demand. After lock downs the economy has rebounded so now we have many dollars looking for products but the supply chains can't keep up.
  - somethoughts 5y ago
    My back of the envelope thought is that both stimulus checks and Paycheck Protection checks went to stuff that is much more closely tracked by CPI. Its mostly rich small business owners that are getting PP checks and using it to build out outdoor dining/service areas of their business and perhaps the occasional personal home remodeling projects or staycation homes which drives purchases of house hold appliances, etc. Perhaps some bitcoin and GME stock as well. Financial Crisis bailouts went to big corps who bought out over-leveraged competitors, questionable startups (Uber, WeWork - basically anything Softbank related), etc. which aren't tracked by CPI measures.
paulpauper 5y ago
Covid caused production to shutdown. This was not as much of a problem with 2007-2009. The result was a huge squeeze in prices and demand because everyone in early 2020 was expecting a repeat of 2008 or some prolonged recession, but instead the economy, stock market, GDP ,etc. went nuts.
lamontcg 5y ago
Printing money doesn't cause inflation if it doesn't get used. If the Fed chair hands me a $100T check and I hide it under my mattress then it has no effect on prices. That check has to get put to use in order for it to start having effects on prices. I have to start buying properties and stuff and then the people that I buy the properties from go and put that money to use. That is extreme but its an example of how money actually has to get used to have an effect on prices. And we're seeing companies and the 1% and 0.1% sitting on massive piles of wealth. They invest that into safe short-term securities which pushes down interest rates. You see bubbles in things like certain rare baseball trading cards. What we haven't seen is wage-price inflation, because that doesn't translate down into the broader real economy. We aren't fixing all the infrastructure and potholes in the nation and putting middle class people to work, who would then go out an buy groceries, middle class houses, etc. SWEs, of course, have been the exception to that rule. But the wage-productivity coupling broke back in 1980s when "inflation" (wage inflation) was put under control. What is strange about the past year or two though is that there's now real upwards pressure on wages outside of tech workers. Don't know how much of that is due to COVID and long COVID removing workers from workforce and how much of that is workers looking at the pandemic and deciding that they weren't going to put up with any more bullshit HR cheerleading. The direct stimmy checks and eviction freeze may have helped with that as well -- although I think the indirect effect there was that many people were able to take a sabbatical and "just learn to code" and therefore hop up the wage ladder. I don't think we printed enough money there to really matter that much, but we gave everyone a 6+ month break so they actually spend some time jumping up the ladder rather than coming home from work too tired every day. The fact that we now see some hard signs of wage-price inflation in the data is the thing which is going to really freak the Fed out, and ultimately they're going to hit the brakes hard, once enough of the pandemic/ukraine supply-shock is in the rear view mirror. It actually is "different this time" because of the rise in wages across the board. The next crisis I think is going to be due to the Fed stomping on the brakes (and possibly the crypto ponzi imploding). Then they'll flip back to ZIRP again, but I think they may not be able to print enough money to get out of the next crisis (which is the problem of "pushing on a string" which everyone has totally forgotten that Keynes used to talk about).

wskinner 5y ago

The quantity of the printing was far lower during the Obama presidency.

svachalek 5y ago
Far, far lower. We're so casually throwing around plans priced in the trillions these days, when just a few years ago people thought billions of dollars was a lot of money.

dragonwriter 5y ago

> Is there any explanation for why previous stimulus during Obama administration didn't cause inflation It did, compared to what would have existed without the stimulus. But the underlying economic problem it addressed wasn't like the pandemic and the control measures directed at it, particularly in the rapidity with which things could spring back from it. What caused visible inflation wasn't the stimulus, but the rapid rebound in the underlying economy, which wasn't a direct product of the stimulus, though the stimulus mitigated second-order damage that might have prevented the rebound. The slower emergence from the conditions prompting the Obama-era stimulus meant that slowly-tapering monetary response could buffer most net inflation effects.

throwawaycities 5y ago

The 2008 bailouts spanned both the Bush and Obama administrations, we can even round them up to $1T each for a total of $2T. Keep in mind those 2 bailouts took the economy from near failure to the longest bull run in history. The size of the bailouts - excuse me stimulus packages - in the last 2 years make 2008 look like a joke in comparison, and it looks like every few months a new “stimulus” will be passed that is larger than any 1 of the 2008 bailouts.

somethoughts 5y ago

My back of the envelope thought is that the majority of the QE given out during the 2008 financial crisis was given out via the banks who then proceeded to lend/hand it out to Fortune 500 type corporations to keep them (and the banks) from collapsing. The stuff that got inflated/propped up were "assets" that wealthy corporations and individuals buy (i.e. risky VC startups, stocks, bonds, income property such as single family rental homes) - which is not stuff tracked by CPI. In the Covid pandemic most of the QE stimulus was to enable low interest debt in order to allow Congress to give it out to "the people" via government stimulus checks. "The people" then proceeded to buy stuff that normal people buy - i.e. consumer staples/discretionary goods which is stuff tracked by CPI.

sjg007 5y ago
The majority of the covid money went to the Paycheck protection act and the terms where so opaque that the rich got a lot richer. The peanuts handed out in direct relief was and is a non-issue except that supply chains shut down because of lock downs and reduced demand. After lock downs the economy has rebounded so now we have many dollars looking for products but the supply chains can't keep up.
- somethoughts 5y ago
  My back of the envelope thought is that both stimulus checks and Paycheck Protection checks went to stuff that is much more closely tracked by CPI. Its mostly rich small business owners that are getting PP checks and using it to build out outdoor dining/service areas of their business and perhaps the occasional personal home remodeling projects or staycation homes which drives purchases of house hold appliances, etc. Perhaps some bitcoin and GME stock as well. Financial Crisis bailouts went to big corps who bought out over-leveraged competitors, questionable startups (Uber, WeWork - basically anything Softbank related), etc. which aren't tracked by CPI measures.

paulpauper 5y ago

Covid caused production to shutdown. This was not as much of a problem with 2007-2009. The result was a huge squeeze in prices and demand because everyone in early 2020 was expecting a repeat of 2008 or some prolonged recession, but instead the economy, stock market, GDP ,etc. went nuts.

lamontcg 5y ago

Printing money doesn't cause inflation if it doesn't get used. If the Fed chair hands me a $100T check and I hide it under my mattress then it has no effect on prices. That check has to get put to use in order for it to start having effects on prices. I have to start buying properties and stuff and then the people that I buy the properties from go and put that money to use. That is extreme but its an example of how money actually has to get used to have an effect on prices. And we're seeing companies and the 1% and 0.1% sitting on massive piles of wealth. They invest that into safe short-term securities which pushes down interest rates. You see bubbles in things like certain rare baseball trading cards. What we haven't seen is wage-price inflation, because that doesn't translate down into the broader real economy. We aren't fixing all the infrastructure and potholes in the nation and putting middle class people to work, who would then go out an buy groceries, middle class houses, etc. SWEs, of course, have been the exception to that rule. But the wage-productivity coupling broke back in 1980s when "inflation" (wage inflation) was put under control. What is strange about the past year or two though is that there's now real upwards pressure on wages outside of tech workers. Don't know how much of that is due to COVID and long COVID removing workers from workforce and how much of that is workers looking at the pandemic and deciding that they weren't going to put up with any more bullshit HR cheerleading. The direct stimmy checks and eviction freeze may have helped with that as well -- although I think the indirect effect there was that many people were able to take a sabbatical and "just learn to code" and therefore hop up the wage ladder. I don't think we printed enough money there to really matter that much, but we gave everyone a 6+ month break so they actually spend some time jumping up the ladder rather than coming home from work too tired every day. The fact that we now see some hard signs of wage-price inflation in the data is the thing which is going to really freak the Fed out, and ultimately they're going to hit the brakes hard, once enough of the pandemic/ukraine supply-shock is in the rear view mirror. It actually is "different this time" because of the rise in wages across the board. The next crisis I think is going to be due to the Fed stomping on the brakes (and possibly the crypto ponzi imploding). Then they'll flip back to ZIRP again, but I think they may not be able to print enough money to get out of the next crisis (which is the problem of "pushing on a string" which everyone has totally forgotten that Keynes used to talk about).