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I honestly think that’s not the main reason we have inflation now. Since every country in the world is seeing similar inflation I would think it’s supply side

I honestly think that’s not the main reason we have inflation now. Since every country in the world is seeing similar inflation I would think it’s supply side and not something any central bank can fight. I’ve always been Keynesian, but it faces the same problem as everything else, you need to be able to predict the future to do it well.

300bps 4y ago
Fed balance sheet is about $9 trillion. This article gives details on $5 trillion in government stimulus. https://www.nytimes.com/interactive/2022/03/11/us/how-covid-stimulus-money-was-spent.html https://www.nytimes.com/interactive/2022/03/11/us/how-covid-... To put those numbers in perspective, the market cap of the entire S&P 500 is about $40 trillion. I hear what you’re saying about supply-side inflation but you don’t think flooding the economy with so much unearned money might be driving up demand a bit? A beach town near me, I paid $4,000 for a week to stay there two years ago. This year, an equivalent house is $15,000 per week. So now I’m driving six hours away to get a house for $10,000 per week. When people make $20,000 per month in stock market/cryptocurrency gains, it starts driving up demand for everything dramatically.
- tonymet 4y ago
  leverage
- kmonsen 4y ago
  Oh I’m not saying the feed is not causing inflation at all. I think the primary driver is supply side, but clearly there is more going on. And that I’m not so sure anymore if federal banks are net positive.
- refurb 4y ago
  They blamed inflation in the 1970's on supply side issues as well. Sure, the oil embargo contributed to price increases, but looking back, it was pretty clear it was fed monetary policy that drove most of it. And monetary policy by Volker that fixed it. No different today. Massively expand the money supply and you (eventually) get inflation. Add in a few supply issues and you amplify the problem. But I agree with you that without the massive monetary expansion, the supply issues would be minor blips.
  - kmonsen 4y ago
    That’s the problem, in bad times you pour money into the market either directly or with interest rates. Then I’m good times the opposite is supposed to happen. But this time the good times never arrived and now we are trying to fix it in the middle of a war, pandemic and massive supply shock, including for energy. It’s too easy to get it wrong and make the problem bigger.
    - refurb 4y ago
      The situation we're in now is pretty close to what some people were warning about back in 2008 when the feds decided on their massive monetary expansion. By the time inflation starts to heat up (it doesn't happen right away), there will be immense pressure to delay any monetary contraction for fear of dampening economic growth. Then Covid hit and the economy was goosed with another massive injection while everyone worried about a recession. Then once inflation starts it's too damn late to put the genie back in the bottle so you just spend the next 5-10 years trying to get it under control while not entirely tanking the economy.
    - landemva 4y ago
      >>> the good times never arrived First two years of Trump were economically pretty good. Low unemployment - particularly for minorities. The Fed was raising rates!
      - kmonsen 4y ago
        Mostly we spent it on tax cuts for the rich instead. You don't cut taxes in good times, that more than offset the minor rate hikes.
        landemva 4y ago
        Spent what? I don't see economic growth as a reason to expand government spending, though many disagree. The economy was good, unemployment was low, rates were rising. USA was still spending it's treasure protecting Afghanistan poppy fields.
- leehuffman 4y ago
  Love your relatively simple (that’s a compliment - I’m sure you can go deeper) yet 100% accurate (IMO) take on this topic. Just want to mention that we shouldn’t forget that the fed’s balance sheet ballooning started with the 2008 crisis. If I recall correctly, they had _just_ started to lightly unload all the things they gobbled up like fiends during that period before COVID smacked. Of course they hard turned 180 degrees and got on the throttle again, going in to stabilize the usual markets along with new additions people never would have anticipated they’d touch, ever. I guess my point is this has been very very long running and is another data point that says (to me) it’s not just a supply side issue that’s driving what we’re seeing.
vmception 4y ago
The US fed is the biggest whale in the whole market And every major economic union is duplicating what the fed does Even if the second part wasn’t true, the first part would cause inflation in those economic unions It buys bonds from ANY bondholder indiscriminantly. It didn’t matter where they are, they get new dollars, and dilute the value of their area.
Tiktaalik 4y ago
Every other country did what the Fed did for the same reason: We've experienced (and are still experiencing) a once a century global pandemic. The measures to limit pandemic deaths would have completely destroyed the economy had the governments and their associated banks not taken the measures they took to support people during this difficult time. It's not the Feds fault, it's the pandemic.
- deleted 4y ago
  [deleted]
- benjaminwootton 4y ago
  There is still considerable debate if those measures were actually effective. Did closing down entire industries, closing borders, making 20 year olds WFH etc really move the needle on Covid deaths in retrospect? And even if it did, was it ethical, fair and is it a reasonable price to damage the economy and life prospects of hundreds of millions of young people who weren’t at statistical risk? Its important because it means the current and future mess is down to bad science and politics and not an act of god.
  - icelancer 4y ago
    > There is still considerable debate if those measures were actually effective. Not really. I agree with the thrust of your post but there is definitely no considerable debate being had on this topic, because Near-Zero COVID is the only acceptable policy, and saving lives at any cost along with it.
    - jokethrowaway 4y ago
      If you're the Chinese Communist party, that's it. I'm not willing to ruin my life on the chance some 90 years old may catch the flu and die. If they're worried about COVID they can isolate.
      - icelancer 4y ago

300bps 4y ago

Fed balance sheet is about $9 trillion. This article gives details on $5 trillion in government stimulus. https://www.nytimes.com/interactive/2022/03/11/us/how-covid-stimulus-money-was-spent.html https://www.nytimes.com/interactive/2022/03/11/us/how-covid-... To put those numbers in perspective, the market cap of the entire S&P 500 is about $40 trillion. I hear what you’re saying about supply-side inflation but you don’t think flooding the economy with so much unearned money might be driving up demand a bit? A beach town near me, I paid $4,000 for a week to stay there two years ago. This year, an equivalent house is $15,000 per week. So now I’m driving six hours away to get a house for $10,000 per week. When people make $20,000 per month in stock market/cryptocurrency gains, it starts driving up demand for everything dramatically.

tonymet 4y ago
leverage
kmonsen 4y ago
Oh I’m not saying the feed is not causing inflation at all. I think the primary driver is supply side, but clearly there is more going on. And that I’m not so sure anymore if federal banks are net positive.
refurb 4y ago
They blamed inflation in the 1970's on supply side issues as well. Sure, the oil embargo contributed to price increases, but looking back, it was pretty clear it was fed monetary policy that drove most of it. And monetary policy by Volker that fixed it. No different today. Massively expand the money supply and you (eventually) get inflation. Add in a few supply issues and you amplify the problem. But I agree with you that without the massive monetary expansion, the supply issues would be minor blips.
- kmonsen 4y ago
  That’s the problem, in bad times you pour money into the market either directly or with interest rates. Then I’m good times the opposite is supposed to happen. But this time the good times never arrived and now we are trying to fix it in the middle of a war, pandemic and massive supply shock, including for energy. It’s too easy to get it wrong and make the problem bigger.
  - refurb 4y ago
    The situation we're in now is pretty close to what some people were warning about back in 2008 when the feds decided on their massive monetary expansion. By the time inflation starts to heat up (it doesn't happen right away), there will be immense pressure to delay any monetary contraction for fear of dampening economic growth. Then Covid hit and the economy was goosed with another massive injection while everyone worried about a recession. Then once inflation starts it's too damn late to put the genie back in the bottle so you just spend the next 5-10 years trying to get it under control while not entirely tanking the economy.
  - landemva 4y ago
    >>> the good times never arrived First two years of Trump were economically pretty good. Low unemployment - particularly for minorities. The Fed was raising rates!
    - kmonsen 4y ago
      Mostly we spent it on tax cuts for the rich instead. You don't cut taxes in good times, that more than offset the minor rate hikes.
      - landemva 4y ago
        Spent what? I don't see economic growth as a reason to expand government spending, though many disagree. The economy was good, unemployment was low, rates were rising. USA was still spending it's treasure protecting Afghanistan poppy fields.
leehuffman 4y ago
Love your relatively simple (that’s a compliment - I’m sure you can go deeper) yet 100% accurate (IMO) take on this topic. Just want to mention that we shouldn’t forget that the fed’s balance sheet ballooning started with the 2008 crisis. If I recall correctly, they had _just_ started to lightly unload all the things they gobbled up like fiends during that period before COVID smacked. Of course they hard turned 180 degrees and got on the throttle again, going in to stabilize the usual markets along with new additions people never would have anticipated they’d touch, ever. I guess my point is this has been very very long running and is another data point that says (to me) it’s not just a supply side issue that’s driving what we’re seeing.

vmception 4y ago

The US fed is the biggest whale in the whole market And every major economic union is duplicating what the fed does Even if the second part wasn’t true, the first part would cause inflation in those economic unions It buys bonds from ANY bondholder indiscriminantly. It didn’t matter where they are, they get new dollars, and dilute the value of their area.

Tiktaalik 4y ago

Every other country did what the Fed did for the same reason: We've experienced (and are still experiencing) a once a century global pandemic. The measures to limit pandemic deaths would have completely destroyed the economy had the governments and their associated banks not taken the measures they took to support people during this difficult time. It's not the Feds fault, it's the pandemic.

deleted 4y ago
[deleted]
benjaminwootton 4y ago
There is still considerable debate if those measures were actually effective. Did closing down entire industries, closing borders, making 20 year olds WFH etc really move the needle on Covid deaths in retrospect? And even if it did, was it ethical, fair and is it a reasonable price to damage the economy and life prospects of hundreds of millions of young people who weren’t at statistical risk? Its important because it means the current and future mess is down to bad science and politics and not an act of god.
- icelancer 4y ago
  > There is still considerable debate if those measures were actually effective. Not really. I agree with the thrust of your post but there is definitely no considerable debate being had on this topic, because Near-Zero COVID is the only acceptable policy, and saving lives at any cost along with it.
  - jokethrowaway 4y ago
    If you're the Chinese Communist party, that's it. I'm not willing to ruin my life on the chance some 90 years old may catch the flu and die. If they're worried about COVID they can isolate.
    - icelancer 4y ago