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> “The current inflation episode is just the kind of event that the fiscal theory of the price level can easily describe. It’s simple. The US government printed

> “The current inflation episode is just the kind of event that the fiscal theory of the price level can easily describe. It’s simple. The US government printed up about $3 trillion of money and sent people checks. It borrowed an additional $2 trillion of money and sent people more checks.” — John H. Cochrane, Senior Fellow, Hoover Institution, Stanford University What is this? It's not like inflation was in the market for an explanation. It's already pretty well understood. We literally have a giant gaping deficit in supply for three very obvious reasons, 1. the pandemic ramp down-up, 2. the war which took out a very large part of energy, grain and other essential commodities, 3. tight labor market ("Great Resignation" anyone?). If anything, this situation vindicates MMT and other theories because over decade of free money and varying debt had no impact yet inflation started as soon as we got a perfect storm of pandemic, war and tight labor market. It sure took a lot to cause a crisis if QE and the pandemic alone weren't enough, we had to add a war and a labor market so tight that it allowed for a renaissance in unions and the Great Resignation. > That’s actually a little more troublesome because there was a big deficit. And that one did not send inflation up. Everything’s hard to read in real time, but we can at least point to a couple of things. First, that was an economy with depressed demand. Whether extra aggregate demand spills into inflation depends on how the economy is doing. So, in 2008, there was arguably room to stoke aggregate demand to increase output. Hmm gee, it's almost like it's an independent variable and your hypothesis was falsified over a very long period of time. Also they ignored every other country? There's a huge variety in debt-to-GDB ratios globally[1], yet somehow everyone is experiencing the exact same rates of inflation... almost as if it was for some common material reasons. 1. https://worldeconomics.com/Debt/ https://worldeconomics.com/Debt/

p33p 4y ago
The tone of your comment is intentionally antagonistic, but I agree with the underlying concept. I think we can see inflation as a direct result of excess globalism, especially lean supply chains, and changes in underlying customer demand, i.e., the basket of products consumers are wanting was different than pre-pandemic. All of these are supply side problems, but it seems to reason that at least part of the pent up demand is a result of new consumer cash. I'd argue it's a political scapegoat though.
- drewcoo 4y ago
  Tone policing is arbitrary and without its own oversight. Defund tone police!
junofan 4y ago
You’re ignoring asset price inflation. China is not experiencing the same rate of inflation.
- vkou 4y ago
  Asset price inflation was happening for over a decade, yet never made it's way into the cost of butter, until wages for butterchurners and milkmaids and the price of gas started growing.
  - lumost 4y ago
    Alternately, asset price inflation didn’t matter until it priced everyone out of housing, commercial real estate, retirement, and any other asset accumulation. This inflation episode coincides with millennials nearing the end of the typical income growth phase of their careers without substantial asset buying power. Eventually people will simply drop out of the race, or demand vastly higher wages to compensate.
    - vkou 4y ago
      > retirement, and any other asset accumulation. Asset inflation doesn't matter in that, as long as the assets don't later deflate. > or demand vastly higher wages to compensate. People can demand all they want, but won't get them until there's a labour shortage. Which is what actually caused wages to grow.
      - lumost 4y ago
        > Asset inflation doesn't matter in that, as long as the assets don't later deflate. For most productive assets (including housing) there is a a limit to the degree of fractional ownership one can reasonably have. While I could buy into REITs, it only closes my short position on housing to own. It's in my interest to own an appreciating/inflating asset that I'm short on - particularly when I will go bust otherwise. If Rent captures all of my purchasing power, I may no longer be able to reasonably close this short position in a reasonable time frame.
credit_guy 4y ago
Here's how much money (M2) was in the economy in the last 4 decades [1]. In the decade from 2010 to 2020 the money supply increased by 7 trillion (from 8 to 15). It increased by another 7 trillion since (standing now at 22). Nothing on the supply side comes close to a sudden injection of 7 trillion dollars in the economy. As for everyone else experiencing inflation, guess what, they blame it on us. Money printed in the US has an inflationary effect in the whole world, not only in the US. Smaller countries cannot simply ring-fence their economy and live in a vacuum. And the EU was not shy about printing money either. [1] https://fred.stlouisfed.org/series/WM2NS https://fred.stlouisfed.org/series/WM2NS
- helloooooooo 4y ago
  And now that money printing is being unwound by the central banks. Money is now being take OUT of M2.
- guerrilla 4y ago
  > Nothing on the supply side comes close to a sudden injection of 7 trillion dollars in the economy. I think you should look into commodity prices. I'm surprised at how many people aren't paying attention to the global game on this. We're literally going to starve out other countries by outbidding them. That's what's going on here. > As for everyone else experiencing inflation, guess what, they blame it on us. No we don't because we know it's a material problem. That's "common knowledge" in Europe. The story here, and as far as I can see, everywhere is "producer costs."
  - alangibson 4y ago
    This. I shut down a side business late last year because steel prices were already up 50% in Europe. Most don't pay attention to commodity prices because they aren't exposed to them. There's also much willful ignorance and motivated reasoning. I've seen people in the US blame it on Build Back Better spending, seemingly unaware that BBB didn't pass.
    - guerrilla 4y ago
zozbot234 4y ago
MMT is basically a logically mangled variety of FTPL, anyway. Both of them see expectations about the government budget (i.e. future taxes and spending) as the main factor behind inflation.
- imtringued 4y ago
  MMT is an accounting framework.
Mikeb85 4y ago
First, point 2 isn't valid, inflation was happening long before the war. > yet somehow everyone is experiencing the exact same rates of inflation... almost as if it was for some common material reasons. Western nations mostly took the same monetary action, likely with some level of coordination so that exchange rates don't wildly change and also because they all had a common problem. Countries like Japan, Switzerland, China and Taiwan all have much lower inflation than the US, UK, Canada and the Eurozone for example. https://tradingeconomics.com/country-list/inflation-rate- https://tradingeconomics.com/country-list/inflation-rate-
- guerrilla 4y ago
  > First, point 2 isn't valid, inflation was happening long before the war. It's the reason that it's at the rate that it is rather than the rate that it was before the war, which is covered by the other two points. I could be wrong but is China not getting discounted Russian, Iranian and Venezuelan energy right now or do they participate fully in the sanctions? That's a question. Japan is an odd duck of an economy, I wouldn't use it in such an argument. Switzerland refutes your/their point as a counterexample since they mirrored EU/US policy. I don't know anything about Taiwan's economy. The further up the supply chain and those that can't sustain themselves are going to be the biggest hit though.
  - Mikeb85 4y ago
    > but is China not getting discounted Russian, Iranian and Venezuelan energy right now or do they participate fully in the sanctions? That's a question. They are but they also had much tighter monetary policy throughout the whole pandemic. Higher interest rates, money supply increase has been constant over the last decade. Switzerland's money supply increased at a near constant rate the last few decades, there wasn't a massive change during COVID. No they didn't mirror US or EU policy, dunno why you think that. And they've had zero or negative interest rates for the better part of a decade, no change during COVID. Japan same deal. Check these same indicators for the higher inflation countries and there's clear policy differences... Late edit - also oil prices are high but not at all-time highs. Last time oil prices were this high the inflation rate wasn't this high. There's other obvious differences.
Izkata 4y ago
> It sure took a lot to cause a crisis if QE and the pandemic alone weren't enough, we had to add a war and a labor market so tight that it allowed for a renaissance in unions and the Great Resignation. Um, what? It did start last year. Calling it the "Putin price hike" is pure propaganda.
- guerrilla 4y ago
  > Calling it the "Putin price hike" is pure propaganda. Saying this requires you to have followed absolutely no commodities news. Please, open Bloomberg or something.
  - Izkata 4y ago
    You mean like here? https://www.bloomberg.com/quote/BCOMTR:IND https://www.bloomberg.com/quote/BCOMTR:IND You're right! It started in 2020, not 2021. It only accelerated in 2022 - months before the invasion of Ukraine.
    - guerrilla 4y ago
imtringued 4y ago
People like shouting and complaining but they haven't got a clue about how stable this system actually is. As long as your government keeps fiscal spending within the target inflation rate of the central bank there is nothing that can rock the boat. We've got this inflation bomb and yet the market thinks we are going into a recession soon. One would have expected a renewable and EV boom with the high energy prices and what not but nope.

p33p 4y ago

The tone of your comment is intentionally antagonistic, but I agree with the underlying concept. I think we can see inflation as a direct result of excess globalism, especially lean supply chains, and changes in underlying customer demand, i.e., the basket of products consumers are wanting was different than pre-pandemic. All of these are supply side problems, but it seems to reason that at least part of the pent up demand is a result of new consumer cash. I'd argue it's a political scapegoat though.

drewcoo 4y ago
Tone policing is arbitrary and without its own oversight. Defund tone police!

junofan 4y ago

You’re ignoring asset price inflation. China is not experiencing the same rate of inflation.

vkou 4y ago
Asset price inflation was happening for over a decade, yet never made it's way into the cost of butter, until wages for butterchurners and milkmaids and the price of gas started growing.
- lumost 4y ago
  Alternately, asset price inflation didn’t matter until it priced everyone out of housing, commercial real estate, retirement, and any other asset accumulation. This inflation episode coincides with millennials nearing the end of the typical income growth phase of their careers without substantial asset buying power. Eventually people will simply drop out of the race, or demand vastly higher wages to compensate.
  - vkou 4y ago
    > retirement, and any other asset accumulation. Asset inflation doesn't matter in that, as long as the assets don't later deflate. > or demand vastly higher wages to compensate. People can demand all they want, but won't get them until there's a labour shortage. Which is what actually caused wages to grow.
    - lumost 4y ago
      > Asset inflation doesn't matter in that, as long as the assets don't later deflate. For most productive assets (including housing) there is a a limit to the degree of fractional ownership one can reasonably have. While I could buy into REITs, it only closes my short position on housing to own. It's in my interest to own an appreciating/inflating asset that I'm short on - particularly when I will go bust otherwise. If Rent captures all of my purchasing power, I may no longer be able to reasonably close this short position in a reasonable time frame.

credit_guy 4y ago

Here's how much money (M2) was in the economy in the last 4 decades [1]. In the decade from 2010 to 2020 the money supply increased by 7 trillion (from 8 to 15). It increased by another 7 trillion since (standing now at 22). Nothing on the supply side comes close to a sudden injection of 7 trillion dollars in the economy. As for everyone else experiencing inflation, guess what, they blame it on us. Money printed in the US has an inflationary effect in the whole world, not only in the US. Smaller countries cannot simply ring-fence their economy and live in a vacuum. And the EU was not shy about printing money either. [1] https://fred.stlouisfed.org/series/WM2NS https://fred.stlouisfed.org/series/WM2NS

helloooooooo 4y ago
And now that money printing is being unwound by the central banks. Money is now being take OUT of M2.
guerrilla 4y ago
> Nothing on the supply side comes close to a sudden injection of 7 trillion dollars in the economy. I think you should look into commodity prices. I'm surprised at how many people aren't paying attention to the global game on this. We're literally going to starve out other countries by outbidding them. That's what's going on here. > As for everyone else experiencing inflation, guess what, they blame it on us. No we don't because we know it's a material problem. That's "common knowledge" in Europe. The story here, and as far as I can see, everywhere is "producer costs."
- alangibson 4y ago
  This. I shut down a side business late last year because steel prices were already up 50% in Europe. Most don't pay attention to commodity prices because they aren't exposed to them. There's also much willful ignorance and motivated reasoning. I've seen people in the US blame it on Build Back Better spending, seemingly unaware that BBB didn't pass.
  - guerrilla 4y ago

zozbot234 4y ago

MMT is basically a logically mangled variety of FTPL, anyway. Both of them see expectations about the government budget (i.e. future taxes and spending) as the main factor behind inflation.

imtringued 4y ago
MMT is an accounting framework.

Mikeb85 4y ago

First, point 2 isn't valid, inflation was happening long before the war. > yet somehow everyone is experiencing the exact same rates of inflation... almost as if it was for some common material reasons. Western nations mostly took the same monetary action, likely with some level of coordination so that exchange rates don't wildly change and also because they all had a common problem. Countries like Japan, Switzerland, China and Taiwan all have much lower inflation than the US, UK, Canada and the Eurozone for example. https://tradingeconomics.com/country-list/inflation-rate- https://tradingeconomics.com/country-list/inflation-rate-

guerrilla 4y ago
> First, point 2 isn't valid, inflation was happening long before the war. It's the reason that it's at the rate that it is rather than the rate that it was before the war, which is covered by the other two points. I could be wrong but is China not getting discounted Russian, Iranian and Venezuelan energy right now or do they participate fully in the sanctions? That's a question. Japan is an odd duck of an economy, I wouldn't use it in such an argument. Switzerland refutes your/their point as a counterexample since they mirrored EU/US policy. I don't know anything about Taiwan's economy. The further up the supply chain and those that can't sustain themselves are going to be the biggest hit though.
- Mikeb85 4y ago
  > but is China not getting discounted Russian, Iranian and Venezuelan energy right now or do they participate fully in the sanctions? That's a question. They are but they also had much tighter monetary policy throughout the whole pandemic. Higher interest rates, money supply increase has been constant over the last decade. Switzerland's money supply increased at a near constant rate the last few decades, there wasn't a massive change during COVID. No they didn't mirror US or EU policy, dunno why you think that. And they've had zero or negative interest rates for the better part of a decade, no change during COVID. Japan same deal. Check these same indicators for the higher inflation countries and there's clear policy differences... Late edit - also oil prices are high but not at all-time highs. Last time oil prices were this high the inflation rate wasn't this high. There's other obvious differences.

Izkata 4y ago

> It sure took a lot to cause a crisis if QE and the pandemic alone weren't enough, we had to add a war and a labor market so tight that it allowed for a renaissance in unions and the Great Resignation. Um, what? It did start last year. Calling it the "Putin price hike" is pure propaganda.

guerrilla 4y ago
> Calling it the "Putin price hike" is pure propaganda. Saying this requires you to have followed absolutely no commodities news. Please, open Bloomberg or something.
- Izkata 4y ago
  You mean like here? https://www.bloomberg.com/quote/BCOMTR:IND https://www.bloomberg.com/quote/BCOMTR:IND You're right! It started in 2020, not 2021. It only accelerated in 2022 - months before the invasion of Ukraine.
  - guerrilla 4y ago

imtringued 4y ago

People like shouting and complaining but they haven't got a clue about how stable this system actually is. As long as your government keeps fiscal spending within the target inflation rate of the central bank there is nothing that can rock the boat. We've got this inflation bomb and yet the market thinks we are going into a recession soon. One would have expected a renewable and EV boom with the high energy prices and what not but nope.