4 ms·

> The only difference today, with inflation, is the supply-side shock. If central bank policies were causing inflation, they'dve caused it over the last decade;

> The only difference today, with inflation, is the supply-side shock. If central bank policies were causing inflation, they'dve caused it over the last decade; and likewise in japan. https://fred.stlouisfed.org/series/M1SL https://fred.stlouisfed.org/series/M1SL They money supply (M1SL) increase by 500% since March 2020 - don't tell me that this is purely a supply side shock. Or at the very least cite something that shows supply has dropped. And then explain to my why policies that increase the money supply by 500% is not expected to cause historic inflation while a pandemic is affecting supply?

mjburgess 4y ago
Well I said central bank, the gov. has also given a stimulus during the pandemic -- this is a larger part of the story. However, we should be careful not just to say inflation is caused by the money supply. This is a theory of why inflation could occur, it isnt inflation. Inflation is just the general rise in prices. Given that everything is suddenly more expensive when energy prices rise (since energy is required for everything), etc. And given supply chain crises, etc. We are seeing a case where the supply-side is undergoing huge general shocks. If you want to say that M1 has caused a demand-side inflation, fine... but it seems to me that 1/2ing the price of oil would 1/2inflation; whereas doubling interest rates wont. So if money supply is the cause of inflation, interest rates will entirely solve the problem. If the supply-side is, then it wont. I'd place a large bet on supply side being the major part. I think 1/2ing oil price would take inflation down to (4-6)%, at which interest rates would then be effective.
- wronglyprepaid 4y ago
  > If you want to say that M1 has caused a demand-side inflation, fine... but it seems to me that 1/2ing the price of oil would 1/2inflation I would like to see some evidence for this, as I don't think this is the case, I think this is just propaganda from fossil fuel companies and their political allies. Like Biden said the economy is just in transition. I think restricting oil and gas supply further will be much more more likely to lower inflation. Maybe Biden should outlaw all oil refining on US soil to help drive the transformation faster. If people were just less greedy and cared more about the environment than their wallets then they would buy electric cars instead of driving gas guzzling SUVs that are destroying our planet.
bryanlarsen 4y ago
If that was the cause, then you'd see it reflected in exchange rates. For example, Canada did about half as much QE per capita as the US did. You would expect that to cause the American dollar to fall against the Canadian dollar, but in fact it has risen. And Canada isn't a picked example, almost every western country did less QE than the US and yet has seen their currency fall against the dollar.

mjburgess 4y ago

Well I said central bank, the gov. has also given a stimulus during the pandemic -- this is a larger part of the story. However, we should be careful not just to say inflation is caused by the money supply. This is a theory of why inflation could occur, it isnt inflation. Inflation is just the general rise in prices. Given that everything is suddenly more expensive when energy prices rise (since energy is required for everything), etc. And given supply chain crises, etc. We are seeing a case where the supply-side is undergoing huge general shocks. If you want to say that M1 has caused a demand-side inflation, fine... but it seems to me that 1/2ing the price of oil would 1/2inflation; whereas doubling interest rates wont. So if money supply is the cause of inflation, interest rates will entirely solve the problem. If the supply-side is, then it wont. I'd place a large bet on supply side being the major part. I think 1/2ing oil price would take inflation down to (4-6)%, at which interest rates would then be effective.

wronglyprepaid 4y ago
> If you want to say that M1 has caused a demand-side inflation, fine... but it seems to me that 1/2ing the price of oil would 1/2inflation I would like to see some evidence for this, as I don't think this is the case, I think this is just propaganda from fossil fuel companies and their political allies. Like Biden said the economy is just in transition. I think restricting oil and gas supply further will be much more more likely to lower inflation. Maybe Biden should outlaw all oil refining on US soil to help drive the transformation faster. If people were just less greedy and cared more about the environment than their wallets then they would buy electric cars instead of driving gas guzzling SUVs that are destroying our planet.

bryanlarsen 4y ago

If that was the cause, then you'd see it reflected in exchange rates. For example, Canada did about half as much QE per capita as the US did. You would expect that to cause the American dollar to fall against the Canadian dollar, but in fact it has risen. And Canada isn't a picked example, almost every western country did less QE than the US and yet has seen their currency fall against the dollar.