5 ms·

It seems to me traditional the story of supply side constraints (lots of places cut capacity for COVID, China is shut down) plus pent up demand (from savings an

It seems to me traditional the story of supply side constraints (lots of places cut capacity for COVID, China is shut down) plus pent up demand (from savings and all the government spending) caused inflation. When looking at TIPS and inflation expectations it looks like it's not quite self reinforcing yet.

Rury 4y ago
But there wouldn't be anywhere near the same level of demand (pent up or otherwise) if there wasn't any money printing / near 0 interest. (Government spending is over budget - they were able to spend more than they have because Fed gave them a good chunk of the money they printed in exchange for treasuries). This is what people seem to forget. Trade involves two items, so you gotta look at both sides of the trade (in this case credit+dollars vs goods). Dollar supply has increased dramatically since 2020, credit near free, while the supply of goods has decreased. Obviously that's a recipe for inflation. Had dollars+credit decreased with the supply of goods instead, people selling goods would have trouble demanding more dollars. For hyperbole, if only 1 dollar existed, no one could sell something for more than 1 dollar, no matter the supply of goods. People might still try to demand more than 1 dollar for their goods, but trade with dollars would cease to happen until they reduced their demands to <= 1 dollar.
- JamesBarney 4y ago
  If the government drastically increased interest rates during covid you're right we'd have less inflation. I don't see the argument here. > This is what people seem to forget. Trade involves two items, so you gotta look at both sides of the trade (in this case credit+dollars vs goods). Dollar supply has increased dramatically since 2020, credit near free, while the supply of goods has decreased. Obviously that's a recipe for inflation. I don't think anyone forgets this. The standard model says supply constrained + generous fiscal/monetary policy = inflation.
  - Rury 4y ago
    Looks like I misinterpreted your post. The parent post mentioned "money printing coming home to roost. Lots of folks say that isn’t what it is." I too seem to have encountered people saying the money printing is a non-factor, and it's just supply chain problems. In reality, both are factors.

Rury 4y ago

But there wouldn't be anywhere near the same level of demand (pent up or otherwise) if there wasn't any money printing / near 0 interest. (Government spending is over budget - they were able to spend more than they have because Fed gave them a good chunk of the money they printed in exchange for treasuries). This is what people seem to forget. Trade involves two items, so you gotta look at both sides of the trade (in this case credit+dollars vs goods). Dollar supply has increased dramatically since 2020, credit near free, while the supply of goods has decreased. Obviously that's a recipe for inflation. Had dollars+credit decreased with the supply of goods instead, people selling goods would have trouble demanding more dollars. For hyperbole, if only 1 dollar existed, no one could sell something for more than 1 dollar, no matter the supply of goods. People might still try to demand more than 1 dollar for their goods, but trade with dollars would cease to happen until they reduced their demands to <= 1 dollar.

JamesBarney 4y ago
If the government drastically increased interest rates during covid you're right we'd have less inflation. I don't see the argument here. > This is what people seem to forget. Trade involves two items, so you gotta look at both sides of the trade (in this case credit+dollars vs goods). Dollar supply has increased dramatically since 2020, credit near free, while the supply of goods has decreased. Obviously that's a recipe for inflation. I don't think anyone forgets this. The standard model says supply constrained + generous fiscal/monetary policy = inflation.
- Rury 4y ago
  Looks like I misinterpreted your post. The parent post mentioned "money printing coming home to roost. Lots of folks say that isn’t what it is." I too seem to have encountered people saying the money printing is a non-factor, and it's just supply chain problems. In reality, both are factors.