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> If those are the principal drivers of inflation, tightening could depress non-energy demand in a way that causes a recession without alleviating inflation Yo

by bko 4y ago

> If those are the principal drivers of inflation, tightening could depress non-energy demand in a way that causes a recession without alleviating inflation You don't think the inflation has anything to do with printing $14 trillion out of thin air, or increasing the M1 money supply from ~4tn in march 2020 to over $20tn today? https://www.covidmoneytracker.org/ https://www.covidmoneytracker.org/ https://fred.stlouisfed.org/series/M1SL https://fred.stlouisfed.org/series/M1SL

mpwoz 4y ago
The M1 jump is not new money for the most part, it's a reclassification of things that used to be M2 as also being M1 (liquid) https://fredblog.stlouisfed.org/2021/05/savings-are-now-more-liquid-and-part-of-m1-money/ https://fredblog.stlouisfed.org/2021/05/savings-are-now-more... M2 increased in 2020, but not by as much as you're saying https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL
- bko 4y ago
  Thanks for sharing. I never knew that. The post says savings accounts were moved into M1 because they're pretty liquid now. But what was the real rationale or implications? Odd time to do that move (April 24, 2020)
  - kccqzy 4y ago
    It was because in April 2020 Regulation D was amended to remove the six-transfer-per-month rule. The idea is that COVID may force people to make withdrawals from savings account more often so banks could allow frequent withdrawals from savings accounts, making them more liquid. It's not a coincidence that after the Fed suspended the rule they reclassified savings account as M1. https://www.federalreserve.gov/supervisionreg/caletters/caltr2106.htm https://www.federalreserve.gov/supervisionreg/caletters/calt...
deleted 4y ago
[deleted]
heartbreak 4y ago
No, because they did basically the same thing ~15 years ago without increasing inflation. Year over year inflation is higher than it’s been in 40 years, and they weren’t printing money then either.
- solaxun 4y ago
  15 years ago was a different animal because the money largely stayed in the banking sector, as excess reserves. This time, a substantial portion of it was deposited directly into consumer's accounts (stimulus checks) - and that money makes it's way into the real economy, pushing prices up.
bryanlarsen 4y ago
Why not both? Countries that didn't do significant QE are experiencing inflation, which argues that there is a significant supply side issue. Countries that did do significant QE have more inflation, which argues that QE also contributed. It appears that we're getting roughly 4% from each component. So hopefully the Fed stops raising interest rates when inflation drops to around 4%.
jmcgough 4y ago
Most economists don't think it's related, or at least a minor cause. Inflation is happening on a global scale right now. The biggest problem we've had is a breakdown of our supply chain because of the pandemic.
- perryizgr8 4y ago
  > Inflation is happening on a global scale right now. All major global economies have been printing money at unprecented rates last couple of years.
  - altpaddle 4y ago
    Money printing to some degree has gone on everywhere but not at the same magnitude. It should not be surprising that countries have different monetary policy. Mexico for example had very little money printing/stimulus and had 7.68% annualized inflation in April.
trashtester 4y ago
The good thing about money printed through QE, is that it can be easily burned through QT. Which is exactly what is being done, now.
coryfklein 4y ago
No! And in fact most economists consider this to be an extremist fringe theory. A quick counterfactual here is, if the US's inflation is caused by its "money printing" (a term that is used quite loosely here, the vast majority of this money never makes it out to the general economy), then how does one explain the inflation experienced in other nations at the same time where no money was printed?
- copenja 4y ago
  I don't think the stimulus being one of the drivers of inflation is an 'extremist fringe theory' at all. I thought the consensus was it was one of many factors, and the exact contribution of the different factors (stimulus, supply issues, etc) was up for debate. US inflation is higher than other wealthy nations and the US also did a larger stimulus. So there is evidence that the additional stimulus may have created greater inflation in the US. Scope this paper here: [0] As far as the consensus for the cause of inflation being unclear among experts, scope this article in left leaning VOX: [1]. [0] https://www.frbsf.org/economic-research/publications/economic-letter/2022/march/why-is-us-inflation-higher-than-in-other-countries/ https://www.frbsf.org/economic-research/publications/economi... [1] https://www.vox.com/23036340/biden-american-rescue-plan-inflation https://www.vox.com/23036340/biden-american-rescue-plan-infl...
  - mike00632 4y ago
    The UK didn't provide stimulus checks yet is experiencing higher inflation than the US. Canada gave a lot more in stimulus checks (with respect to GDP) than the US but is experiencing less inflation than the US.
    - leereeves 4y ago
      > The UK government has borrowed vast sums of money to fund over £400 billion ($558 billion) in stimulus during the crisis. Total government debt has soared to £2 trillion ($2.8 trillion), or close to 100% of GDP, a level not seen since the 1960s, according to the Office for National Statistics. https://www.cnn.com/2021/03/03/economy/budget-2021-uk-stimulus/index.html https://www.cnn.com/2021/03/03/economy/budget-2021-uk-stimul...
alangibson 4y ago
Nope. I buy manufactured goods for a couple of businesses and everyone blames the price increases on supply issues. Also, Google MMT. Printing money is only inflationary of the economy is running near capacity.
- Auracle 4y ago
  MMT is far from fact, and I would go as far to say this little issue we're having disproves a good portion of it.
  - alangibson 4y ago
    Which portion?

by bko 4y ago

mpwoz 4y ago

The M1 jump is not new money for the most part, it's a reclassification of things that used to be M2 as also being M1 (liquid) https://fredblog.stlouisfed.org/2021/05/savings-are-now-more-liquid-and-part-of-m1-money/ https://fredblog.stlouisfed.org/2021/05/savings-are-now-more... M2 increased in 2020, but not by as much as you're saying https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL

bko 4y ago
Thanks for sharing. I never knew that. The post says savings accounts were moved into M1 because they're pretty liquid now. But what was the real rationale or implications? Odd time to do that move (April 24, 2020)
- kccqzy 4y ago
  It was because in April 2020 Regulation D was amended to remove the six-transfer-per-month rule. The idea is that COVID may force people to make withdrawals from savings account more often so banks could allow frequent withdrawals from savings accounts, making them more liquid. It's not a coincidence that after the Fed suspended the rule they reclassified savings account as M1. https://www.federalreserve.gov/supervisionreg/caletters/caltr2106.htm https://www.federalreserve.gov/supervisionreg/caletters/calt...

deleted 4y ago

[deleted]

heartbreak 4y ago

No, because they did basically the same thing ~15 years ago without increasing inflation. Year over year inflation is higher than it’s been in 40 years, and they weren’t printing money then either.

solaxun 4y ago
15 years ago was a different animal because the money largely stayed in the banking sector, as excess reserves. This time, a substantial portion of it was deposited directly into consumer's accounts (stimulus checks) - and that money makes it's way into the real economy, pushing prices up.

bryanlarsen 4y ago

Why not both? Countries that didn't do significant QE are experiencing inflation, which argues that there is a significant supply side issue. Countries that did do significant QE have more inflation, which argues that QE also contributed. It appears that we're getting roughly 4% from each component. So hopefully the Fed stops raising interest rates when inflation drops to around 4%.

jmcgough 4y ago

Most economists don't think it's related, or at least a minor cause. Inflation is happening on a global scale right now. The biggest problem we've had is a breakdown of our supply chain because of the pandemic.

perryizgr8 4y ago
> Inflation is happening on a global scale right now. All major global economies have been printing money at unprecented rates last couple of years.
- altpaddle 4y ago
  Money printing to some degree has gone on everywhere but not at the same magnitude. It should not be surprising that countries have different monetary policy. Mexico for example had very little money printing/stimulus and had 7.68% annualized inflation in April.

trashtester 4y ago

The good thing about money printed through QE, is that it can be easily burned through QT. Which is exactly what is being done, now.

coryfklein 4y ago

No! And in fact most economists consider this to be an extremist fringe theory. A quick counterfactual here is, if the US's inflation is caused by its "money printing" (a term that is used quite loosely here, the vast majority of this money never makes it out to the general economy), then how does one explain the inflation experienced in other nations at the same time where no money was printed?

copenja 4y ago
I don't think the stimulus being one of the drivers of inflation is an 'extremist fringe theory' at all. I thought the consensus was it was one of many factors, and the exact contribution of the different factors (stimulus, supply issues, etc) was up for debate. US inflation is higher than other wealthy nations and the US also did a larger stimulus. So there is evidence that the additional stimulus may have created greater inflation in the US. Scope this paper here: [0] As far as the consensus for the cause of inflation being unclear among experts, scope this article in left leaning VOX: [1]. [0] https://www.frbsf.org/economic-research/publications/economic-letter/2022/march/why-is-us-inflation-higher-than-in-other-countries/ https://www.frbsf.org/economic-research/publications/economi... [1] https://www.vox.com/23036340/biden-american-rescue-plan-inflation https://www.vox.com/23036340/biden-american-rescue-plan-infl...
- mike00632 4y ago
  The UK didn't provide stimulus checks yet is experiencing higher inflation than the US. Canada gave a lot more in stimulus checks (with respect to GDP) than the US but is experiencing less inflation than the US.
  - leereeves 4y ago
    > The UK government has borrowed vast sums of money to fund over £400 billion ($558 billion) in stimulus during the crisis. Total government debt has soared to £2 trillion ($2.8 trillion), or close to 100% of GDP, a level not seen since the 1960s, according to the Office for National Statistics. https://www.cnn.com/2021/03/03/economy/budget-2021-uk-stimulus/index.html https://www.cnn.com/2021/03/03/economy/budget-2021-uk-stimul...

alangibson 4y ago

Nope. I buy manufactured goods for a couple of businesses and everyone blames the price increases on supply issues. Also, Google MMT. Printing money is only inflationary of the economy is running near capacity.

Auracle 4y ago
MMT is far from fact, and I would go as far to say this little issue we're having disproves a good portion of it.
- alangibson 4y ago
  Which portion?