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An increase in the supply of money doesn't correlate to the distribution of that increased supply into the hands of consumers (by way of salaries). Prices go up

An increase in the supply of money doesn't correlate to the distribution of that increased supply into the hands of consumers (by way of salaries). Prices go up, and the cost burden of those prices are unequally distributed. Raw materials prices are usually first to increase in price and labor costs usually lag. Labor costs are usually determined by supply and demand of available labor rather than underlying raw materials costs or availability of money supply. The ability for governments and companies to borrow at low interest rates usually has a higher impact, but monetary policy uses interest rates to regulate the impact of inflation.

photochemsyn 4y ago
As far as labor competition, that only works if there are a wide variety of employers, rather than a few primary employers (Amazon, Walmart) who can effective set wages prices. Labor competition has also gone international, driving labor wages down in the US. Factors like these account for the relatively flat growth in bottom-level wages relative to CEO/shareholder wages, which have skyrocketed throughout the past 40-year neoliberal globalization period. As far as this round of inflation, monetary supply arguments are a bit specious. The Fed's 'quantitative easing' (money printing goess brrrrr) is pretty trickle-down Reaganomics in practice, although they could have just printed monthly checks for average citizens instead of giving it all to large banks and corporations, who use it for things like stock buybacks. A more plausible explanation is breakdown in the global supply chains and failure to build up resilient infrastructure domestically. Consider gasoline and diesel prices, which have knock-on effects in all transportation-related sectors (food delivery, goods delivery, commuter costs, etc.). In 2015 US crude oil exports were allowed for the first time since the early 1970s and at least one major refinery was closed. This has clearly impacted the supply of refined products in the USA: "U.S. Fuel Exports Are Draining Domestic Diesel And Gasoline Supplies, May 2022" https://oilprice.com/Latest-Energy-News/World-News/US-Fuel-Exports-Are-Draining-Domestic-Diesel-And-Gasoline-Supplies.html https://oilprice.com/Latest-Energy-News/World-News/US-Fuel-E... This is at least a simple concept: reduce supply when demand remains constant and prices will go up, aka inflation.
- gbasin 4y ago
  > instead of giving it all to large banks and corporations, who use it for things like stock buybacks. this is nonsense and has no basis in reality, as far as I know
  - photochemsyn 4y ago
    It's reported pretty frequently, although the Fed has put some limits on stock buybacks: Background (ABC): "The Fed has bought roughly $2.1 trillion of Treasurys and mortgage-backed securities since the pandemic intensified in March [2020] That has flooded many short-term lending markets with cash, making it easier for many banks to borrow." https://www.bankingdive.com/news/federal-reserve-stock-buybacks-2021/592553/ https://www.bankingdive.com/news/federal-reserve-stock-buyba... > "The Federal Reserve said the country's largest banks can resume stock buybacks in the first quarter of 2021 with certain limitations, after the central bank released the results of its first-ever "mid-cycle" stress tests Friday... JPMorgan Chase was the first bank to announce it would resume share repurchases. Just minutes after the Fed released stress test results, the bank announced its board approved a new share repurchase program of $30 billion." It's not just the banks, the airlines did the same thing: "Companies that binged on buybacks now seek bailouts from taxpayers, March 2020" https://www.cnn.com/2020/03/24/business/bailout-buybacks-airlines-boeing/index.html https://www.cnn.com/2020/03/24/business/bailout-buybacks-air...
    - gbasin 4y ago
      Yes the fed has taken actions that have suppressed interest rates. This makes it cheaper for everyone to borrow. What companies do with the money (like buyback shares, which is equivalent to a shareholder dividend) is a wholly separate issue

photochemsyn 4y ago

As far as labor competition, that only works if there are a wide variety of employers, rather than a few primary employers (Amazon, Walmart) who can effective set wages prices. Labor competition has also gone international, driving labor wages down in the US. Factors like these account for the relatively flat growth in bottom-level wages relative to CEO/shareholder wages, which have skyrocketed throughout the past 40-year neoliberal globalization period. As far as this round of inflation, monetary supply arguments are a bit specious. The Fed's 'quantitative easing' (money printing goess brrrrr) is pretty trickle-down Reaganomics in practice, although they could have just printed monthly checks for average citizens instead of giving it all to large banks and corporations, who use it for things like stock buybacks. A more plausible explanation is breakdown in the global supply chains and failure to build up resilient infrastructure domestically. Consider gasoline and diesel prices, which have knock-on effects in all transportation-related sectors (food delivery, goods delivery, commuter costs, etc.). In 2015 US crude oil exports were allowed for the first time since the early 1970s and at least one major refinery was closed. This has clearly impacted the supply of refined products in the USA: "U.S. Fuel Exports Are Draining Domestic Diesel And Gasoline Supplies, May 2022" https://oilprice.com/Latest-Energy-News/World-News/US-Fuel-Exports-Are-Draining-Domestic-Diesel-And-Gasoline-Supplies.html https://oilprice.com/Latest-Energy-News/World-News/US-Fuel-E... This is at least a simple concept: reduce supply when demand remains constant and prices will go up, aka inflation.

gbasin 4y ago
> instead of giving it all to large banks and corporations, who use it for things like stock buybacks. this is nonsense and has no basis in reality, as far as I know
- photochemsyn 4y ago
  It's reported pretty frequently, although the Fed has put some limits on stock buybacks: Background (ABC): "The Fed has bought roughly $2.1 trillion of Treasurys and mortgage-backed securities since the pandemic intensified in March [2020] That has flooded many short-term lending markets with cash, making it easier for many banks to borrow." https://www.bankingdive.com/news/federal-reserve-stock-buybacks-2021/592553/ https://www.bankingdive.com/news/federal-reserve-stock-buyba... > "The Federal Reserve said the country's largest banks can resume stock buybacks in the first quarter of 2021 with certain limitations, after the central bank released the results of its first-ever "mid-cycle" stress tests Friday... JPMorgan Chase was the first bank to announce it would resume share repurchases. Just minutes after the Fed released stress test results, the bank announced its board approved a new share repurchase program of $30 billion." It's not just the banks, the airlines did the same thing: "Companies that binged on buybacks now seek bailouts from taxpayers, March 2020" https://www.cnn.com/2020/03/24/business/bailout-buybacks-airlines-boeing/index.html https://www.cnn.com/2020/03/24/business/bailout-buybacks-air...
  - gbasin 4y ago
    Yes the fed has taken actions that have suppressed interest rates. This makes it cheaper for everyone to borrow. What companies do with the money (like buyback shares, which is equivalent to a shareholder dividend) is a wholly separate issue