3 ms·

It’s complicated, therefore supply doesn’t matter for money, only demand? I think you’ll need to do a better job convincing me than that.

arcticbull 4y ago
I'm not convincing you of anything, I'm sharing that your definition of inflation is not the definition generally accepted. Money supply growth is not inflation. Inflation is a broad-based reduction in purchasing power caused by any number of things. By definition. Here's why. A 50% sales tax would be inflationary without changing the money supply. Conversely, a trillion dollar coin minted and put into a vault wouldn't have any inflationary effect whatsoever because placing it into the vault has a commensurate reduction in velocity. The idea that 'more money' necessarily immediately means each unit is worth less doesn't stand up to any scrutiny and many counterexamples exist all over the world - and at home. Just look at Japan's monetary base expansion since the 90s [1], while inflation was dead flat zero [2]. Your model is too simplistic which is why it is not generally accepted. [1] https://fred.stlouisfed.org/series/MYAGM2JPM189S https://fred.stlouisfed.org/series/MYAGM2JPM189S [2] https://fred.stlouisfed.org/series/JPNCPIALLMINMEI https://fred.stlouisfed.org/series/JPNCPIALLMINMEI
- jtbayly 4y ago
  Nobody is claiming that inflation is only caused by printing money. You’re straw-manning. What we’re saying is that everybody knows supply and demand affects money, also. And if you’d like examples of hyperinflation from over-supply of money, you can just look around.
  - arcticbull 4y ago
    I was replying to this. > It’s complicated, therefore supply doesn’t matter for money, only demand? I never said supply doesn't matter. Re-read my initial reply. ("... and yes, to a degree, monetary base"). Money in a modern centrally banked economy enters the system on a pull model - not push. Banks don't push money into the system. Borrowers create money when they take out loans and that money obtains its value from the obligation to repay the debt that created it. Once repaid, that money evaporates. Money is always being created and destroyed, which is how interest rates control supply of money through demand of loans. This means supply follows demand so it's harder to devalue due to supply increases as a supply increase inherently follows a demand increase. In ordinary course, when not subject to interventions. > And if you’d like examples of hyperinflation from over-supply of money, you can just look around. Hyperinflation isn't what happens when the money supply increases a lot, it's what happens when the population rejects the currency and is usually tied to an exogenous event like a war, corruption, regime change or onerous foreign-denominated debt. Most often a combination - it's a completely different beast. [1] Folks conflate the two because "hyperinflation" sounds like "inflation but more!" - the increase in money supply is a symptom, but it's not the cause. It's effectively an economic and monetary collapse. I'm not sure you'll be able to actually find an example where oversupply of currency in isolation led to hyperinflation, but if you can find an article demonstrating a causal relationship I'd love to read it. [1] https://www.businessinsider.com/the-truth-about-hyperinflation-its-more-than-just-a-monetary-phenomenon-2011-3 https://www.businessinsider.com/the-truth-about-hyperinflati...

arcticbull 4y ago

I'm not convincing you of anything, I'm sharing that your definition of inflation is not the definition generally accepted. Money supply growth is not inflation. Inflation is a broad-based reduction in purchasing power caused by any number of things. By definition. Here's why. A 50% sales tax would be inflationary without changing the money supply. Conversely, a trillion dollar coin minted and put into a vault wouldn't have any inflationary effect whatsoever because placing it into the vault has a commensurate reduction in velocity. The idea that 'more money' necessarily immediately means each unit is worth less doesn't stand up to any scrutiny and many counterexamples exist all over the world - and at home. Just look at Japan's monetary base expansion since the 90s [1], while inflation was dead flat zero [2]. Your model is too simplistic which is why it is not generally accepted. [1] https://fred.stlouisfed.org/series/MYAGM2JPM189S https://fred.stlouisfed.org/series/MYAGM2JPM189S [2] https://fred.stlouisfed.org/series/JPNCPIALLMINMEI https://fred.stlouisfed.org/series/JPNCPIALLMINMEI

jtbayly 4y ago
Nobody is claiming that inflation is only caused by printing money. You’re straw-manning. What we’re saying is that everybody knows supply and demand affects money, also. And if you’d like examples of hyperinflation from over-supply of money, you can just look around.
- arcticbull 4y ago
  I was replying to this. > It’s complicated, therefore supply doesn’t matter for money, only demand? I never said supply doesn't matter. Re-read my initial reply. ("... and yes, to a degree, monetary base"). Money in a modern centrally banked economy enters the system on a pull model - not push. Banks don't push money into the system. Borrowers create money when they take out loans and that money obtains its value from the obligation to repay the debt that created it. Once repaid, that money evaporates. Money is always being created and destroyed, which is how interest rates control supply of money through demand of loans. This means supply follows demand so it's harder to devalue due to supply increases as a supply increase inherently follows a demand increase. In ordinary course, when not subject to interventions. > And if you’d like examples of hyperinflation from over-supply of money, you can just look around. Hyperinflation isn't what happens when the money supply increases a lot, it's what happens when the population rejects the currency and is usually tied to an exogenous event like a war, corruption, regime change or onerous foreign-denominated debt. Most often a combination - it's a completely different beast. [1] Folks conflate the two because "hyperinflation" sounds like "inflation but more!" - the increase in money supply is a symptom, but it's not the cause. It's effectively an economic and monetary collapse. I'm not sure you'll be able to actually find an example where oversupply of currency in isolation led to hyperinflation, but if you can find an article demonstrating a causal relationship I'd love to read it. [1] https://www.businessinsider.com/the-truth-about-hyperinflation-its-more-than-just-a-monetary-phenomenon-2011-3 https://www.businessinsider.com/the-truth-about-hyperinflati...