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Predictably, the Fed's quantitative easing combined with stimulus created inflation. You can make a decent argument that the initial policy was the right thing

Predictably, the Fed's quantitative easing combined with stimulus created inflation. You can make a decent argument that the initial policy was the right thing to do. I mean, if you're going to force people not to work because of a pandemic, you have to give them some money. Whether there was (or is ever) a need to prop up the stock market as well is less obvious. But where they VERY clearly f'ed up is labeling the inflation as "transitory" and allowing the market to keep running up ridiculous returns (which were detached from underlying value) and now having to clamp down much harder to get a hold on inflation, which will cause significant structural unemployment as those companies that were running red hot and expanding until a few months ago have to do a bunch of layoffs.

dragonwriter 4y ago
> Predictably, the Fed's quantitative easing combined with stimulus created inflation. Combined with the removal of the conditions to which the stimulus and easing were responding, largely, the effects of both voluntary and mandatory behavior changes associated with the pandemic. (That's also why this didn't happen with last fiscal/monetary stimulus, because the underlying conditions didn't snap back as fast, allowing stimulus to unwind without overshooting.)
coryfklein 4y ago
A much greater proportion of this inflation is due to supply side shocks, and very little (if any at all) has to do with QE. COVID simultaneously destroyed supply chains while shifting consumer from spending on services to spending on goods which, by the laws of supply and demand, meant prices for goods went up: inflation. Energy and locomotion are core aspects of the US economy that factor into just about everything including – you guessed it – the price of goods! And just as the impacts of the pandemic were easing in the US, one of the world's largest oil producers started a war and then was subject to sanctions and embargos by the US and Europe. And so, surprise, the price at the pump has skyrocketed! Again, no connection to QE. The stimulus, on the other hand, I would agree with you; those checks increased the purchasing power of individuals right as supply chain issues cut the supply of goods. I imagine the alternative world where the stimulus hadn't happened might have been more structurally worse, albeit with lower inflation.
- lend000 4y ago
  While supply chain problems were real during the pandemic, especially w.r.t. automobiles, QE is by far the driving force of our current economic situation. Here is some data to put your talking point into context. Look at the recent production some of the items being severely impacted by inflation. Now look up their price charts (you can use February before Putin invaded Ukraine to eliminate another variable). Wheat: https://www.statista.com/statistics/267268/production-of-wheat-worldwide-since-1990/ https://www.statista.com/statistics/267268/production-of-whe... Meats: https://www.statista.com/statistics/237632/production-of-meat-worldwide-since-1990/ https://www.statista.com/statistics/237632/production-of-mea... Steel: https://www.statista.com/statistics/267264/world-crude-steel-production/ https://www.statista.com/statistics/267264/world-crude-steel... The only economically significant shortages (as defined by lower production) were in automobiles and oil: https://www.statista.com/statistics/262747/worldwide-automobile-production-since-2000/ https://www.statista.com/statistics/262747/worldwide-automob... You could argue that demand for oil was also lower, because of fewer automobiles and, of course, lockdowns. Crude oil prices were at 2018 levels until the very end of 2021 (when inflation was at 7%), so you can't blame inflation on that. Did Covid affect productivity? Undeniably. A significant portion of the world population was literally locked down for months. Is that lower productivity and resulting supply chain disruptment a contributor to inflation? Probably. Although without any government intervention, prices probably would have depressed similar to the 1930's as the economy contracted and cash became more valuable as paper loans eliminated money generated by the money multiplier. But these statements suggest a low level misunderstanding: "and very little (if any at all) has to do with QE" and "one of the world's largest oil producers started a war." QE is a major contributor (hence why it is finally being rolled back to undo the damage...) and the inflation rate was 7.9% in February, BEFORE Putin invaded Ukraine. If I had to guess a significance, I'd say overall economic price increases are a consequence of 70% QE, 20% supply chain, 10% Russia. Another thing... look at the stock market. If the supply chain truly demolished the value of the economy, why did the market go on a historic bull run? Either the supply chain issues were not as bad as you think, or the Fed way over-quantitative-eased and disconnected prices from reality by expanding their balance sheet with literal securities, and of course the historically low interest rates.
  - 4y ago

dragonwriter 4y ago

> Predictably, the Fed's quantitative easing combined with stimulus created inflation. Combined with the removal of the conditions to which the stimulus and easing were responding, largely, the effects of both voluntary and mandatory behavior changes associated with the pandemic. (That's also why this didn't happen with last fiscal/monetary stimulus, because the underlying conditions didn't snap back as fast, allowing stimulus to unwind without overshooting.)

coryfklein 4y ago

A much greater proportion of this inflation is due to supply side shocks, and very little (if any at all) has to do with QE. COVID simultaneously destroyed supply chains while shifting consumer from spending on services to spending on goods which, by the laws of supply and demand, meant prices for goods went up: inflation. Energy and locomotion are core aspects of the US economy that factor into just about everything including – you guessed it – the price of goods! And just as the impacts of the pandemic were easing in the US, one of the world's largest oil producers started a war and then was subject to sanctions and embargos by the US and Europe. And so, surprise, the price at the pump has skyrocketed! Again, no connection to QE. The stimulus, on the other hand, I would agree with you; those checks increased the purchasing power of individuals right as supply chain issues cut the supply of goods. I imagine the alternative world where the stimulus hadn't happened might have been more structurally worse, albeit with lower inflation.

lend000 4y ago
While supply chain problems were real during the pandemic, especially w.r.t. automobiles, QE is by far the driving force of our current economic situation. Here is some data to put your talking point into context. Look at the recent production some of the items being severely impacted by inflation. Now look up their price charts (you can use February before Putin invaded Ukraine to eliminate another variable). Wheat: https://www.statista.com/statistics/267268/production-of-wheat-worldwide-since-1990/ https://www.statista.com/statistics/267268/production-of-whe... Meats: https://www.statista.com/statistics/237632/production-of-meat-worldwide-since-1990/ https://www.statista.com/statistics/237632/production-of-mea... Steel: https://www.statista.com/statistics/267264/world-crude-steel-production/ https://www.statista.com/statistics/267264/world-crude-steel... The only economically significant shortages (as defined by lower production) were in automobiles and oil: https://www.statista.com/statistics/262747/worldwide-automobile-production-since-2000/ https://www.statista.com/statistics/262747/worldwide-automob... You could argue that demand for oil was also lower, because of fewer automobiles and, of course, lockdowns. Crude oil prices were at 2018 levels until the very end of 2021 (when inflation was at 7%), so you can't blame inflation on that. Did Covid affect productivity? Undeniably. A significant portion of the world population was literally locked down for months. Is that lower productivity and resulting supply chain disruptment a contributor to inflation? Probably. Although without any government intervention, prices probably would have depressed similar to the 1930's as the economy contracted and cash became more valuable as paper loans eliminated money generated by the money multiplier. But these statements suggest a low level misunderstanding: "and very little (if any at all) has to do with QE" and "one of the world's largest oil producers started a war." QE is a major contributor (hence why it is finally being rolled back to undo the damage...) and the inflation rate was 7.9% in February, BEFORE Putin invaded Ukraine. If I had to guess a significance, I'd say overall economic price increases are a consequence of 70% QE, 20% supply chain, 10% Russia. Another thing... look at the stock market. If the supply chain truly demolished the value of the economy, why did the market go on a historic bull run? Either the supply chain issues were not as bad as you think, or the Fed way over-quantitative-eased and disconnected prices from reality by expanding their balance sheet with literal securities, and of course the historically low interest rates.
- 4y ago