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The price level depends on the money supply and the amount of goods available. It was predictable that giving people more spending power when production was low
by Bostonian 4y ago
The price level depends on the money supply and the amount of goods available. It was predictable that giving people more spending power when production was lower would case inflation.
- ajross 4y agoThen why did it take two years? Supplies were low and savings rates were high in 2020, too. Yet inflation didn't start growing until well after the omicron wave had subsided. Why? Nothing happened economically in January of 2022 that should have triggered anything notable economically. There was no new relief package. No change in supply chains (though the Shanghai shutdown was about to happen). Yet... inflation started to spike then. It's not hard to guess at an answer: the covid recovery led to a loosening of purse strings that were kept tight during lockdowns out of general social anxiety. Makes enough sense to me. But it's still a special-case answer to a special case thing. First principles economics, in fact, would have done extremely badly.