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Money supply increases don’t necessarily lead to inflation. They only do when there’s more consumer spending on products. In the recent low interest rate perio

Money supply increases don’t necessarily lead to inflation. They only do when there’s more consumer spending on products. In the recent low interest rate period, that didn’t really happen. Money instead went into an asset price bubble. What we need to do to curb inflation is to lower consumption. The best point where to do that is the rich with their excessive consumption.

jbay808 4y ago
> Money supply increases don’t necessarily lead to inflation[...] Money instead went into an asset price bubble. In the short term, yes, but this is a precursor to inflation; eventually the inflated asset prices propagate to consumer prices. Some paths are: increased demand (the "wealth effect"), reduced productivity (eg. people retiring with their stock portfolios or quitting jobs to speculate on crypto/real estate), as well as rising rents. Engineering trains us to analyze full cycles. There are a lot of perpetual motion machines that look promising on the expansion stroke. Reduced borrowing costs can mask this pressure, as eg. rents remain low when mortgages are cheap, despite high housing prices. But when borrowing costs rise the floodgates are opened. Either the bubble pops and the paper asset "wealth" gets vacuumed away, or else it dumps that growth into consumer prices.