4 ms·

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 supp

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.
- p33p 4y ago
  You’ve said QE is the cause, but provide no evidence to back up these claims. Considering QE occurred multiple times after the 08 crisis, what makes this time different? Bold claims without much substance.
  - lend000 4y ago
    Perhaps I struggle to articulate this clearly because it seems so obvious. If there are 3 potential logical causes being discussed (QE, reduction in supply of commodities due to covid, and reduction in supply of fossil fuels from Russia since the invasion of Ukraine), and I provide data that suggests that 2 of them could not be significantly responsible, that leaves only one. The difference is the magnitude. Never before in US history has the government expanded the M2 money supply by ~20% in a matter of a few weeks. This is the chart that sums it up [0]. That was significantly by direct cash injection/expansion of the Fed's balance sheet. Combined with ultra low interest rates (also the most significant in US history) and the elimination of the reserve requirement, M2 has been growing at an incredible rate ever since. When you have 1 gold bar worth of value in an economy and 100 dollars, a gold bar is worth $100. If you print 20 more dollars, well, that gold bar will soon be worth $120, and not because the inherent value or usefulness of the gold bar changed. [0] https://fred.stlouisfed.org/series/WM2NS https://fred.stlouisfed.org/series/WM2NS
MrWiffles 4y ago
I agree with pretty much all of this, but would add that while the stimulus was absolutely necessary, it was applied/distributed so sloppily that lots of people who didn’t need it wound up with tons of free money (I personally know a few) while folks who were really suffering got almost no benefit at all (too little too late). Once again, the only people who came out ahead are the ones with all the money and power in the first place.

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.

p33p 4y ago
You’ve said QE is the cause, but provide no evidence to back up these claims. Considering QE occurred multiple times after the 08 crisis, what makes this time different? Bold claims without much substance.
- lend000 4y ago
  Perhaps I struggle to articulate this clearly because it seems so obvious. If there are 3 potential logical causes being discussed (QE, reduction in supply of commodities due to covid, and reduction in supply of fossil fuels from Russia since the invasion of Ukraine), and I provide data that suggests that 2 of them could not be significantly responsible, that leaves only one. The difference is the magnitude. Never before in US history has the government expanded the M2 money supply by ~20% in a matter of a few weeks. This is the chart that sums it up [0]. That was significantly by direct cash injection/expansion of the Fed's balance sheet. Combined with ultra low interest rates (also the most significant in US history) and the elimination of the reserve requirement, M2 has been growing at an incredible rate ever since. When you have 1 gold bar worth of value in an economy and 100 dollars, a gold bar is worth $100. If you print 20 more dollars, well, that gold bar will soon be worth $120, and not because the inherent value or usefulness of the gold bar changed. [0] https://fred.stlouisfed.org/series/WM2NS https://fred.stlouisfed.org/series/WM2NS

MrWiffles 4y ago

I agree with pretty much all of this, but would add that while the stimulus was absolutely necessary, it was applied/distributed so sloppily that lots of people who didn’t need it wound up with tons of free money (I personally know a few) while folks who were really suffering got almost no benefit at all (too little too late). Once again, the only people who came out ahead are the ones with all the money and power in the first place.