4 ms·

Central banks have been printing money for years (quantitative easing, "whatever it takes" , etc) and there was no inflation.

Manuel_D 4y ago
But the money supply was kept roughly in line with the growth of the economy. Inflation only occurs if the total money supply grows faster than the economy. There's some nuance over how much money is actively being spent vs sitting in savings, but the broad strokes of it is economic output divided by money supply.
- cjbgkagh 4y ago
  Only because money velocity fell off a cliff, money velocity is one of the multipliers that goes into the apparent quantity of money as the same dollar is used more often. Given the asset bubbles due the printing people are incentivized to invest into it so long as the bubble continues to grow (or at least not shrink) people are incentivized to keep holding. So you can keep printing money without seeing inflation so long as asset bubbles can soak it up and money velocity drops. Now when the reverse happens, which will happen eventually even if it takes a very long time, that is when you get inflation. So paradoxically increasing the base money supply enough to generate asset bubbles has a deflationary effect.
cjbgkagh 4y ago
The 'excess' money was soaked up into asset bubbles not measured by most inflation indexes, or at least under weighted. Which is fine until people sell those assets and spend the money which they have to do eventually.
rightbyte 4y ago
Trickle down economy you know. Of all these house millionaires you need to sell your house and move somewhere cheaper to actually benefit. It takes time until enough people cashes out to move the needle.
refurb 4y ago
Money velocity is an important part of inflation as well. Back in 2008 during the financial crisis, the Fed printed a ton of money and used it to buy crappy mortgages. However, banks were worried about solvency and the Fed was paying interest on reserves the bank kept with them - as a result the "extra" money never made it into the system right away. It's like trying to light a fire and when it doesn't start pouring more gasoline on it. It will eventually light, but if you've poured a ton of gas on it by then it's going to burn fast.
mrjin 4y ago
>there was no inflation. Of course, there was inflation but could not be reflected by CPI. Just look at the asset prices, can you explain the dramatic increasing? In the past, printed money mostly went to rich people and made asset prices skyrocketing. But this time is different, people live by paycheck got some chunk of it. And here we are.
WalterBright 4y ago
No inflation? https://www.in2013dollars.com/current-inflation-rate https://www.in2013dollars.com/current-inflation-rate Chart sez you're mistaken.
- pmontra 4y ago
  It seems that the chart proves my point: years of quantitative easing and inflation around our below 2% and economists complaining that they were failing to foster inflation and could not explain why.

Manuel_D 4y ago

But the money supply was kept roughly in line with the growth of the economy. Inflation only occurs if the total money supply grows faster than the economy. There's some nuance over how much money is actively being spent vs sitting in savings, but the broad strokes of it is economic output divided by money supply.

cjbgkagh 4y ago
Only because money velocity fell off a cliff, money velocity is one of the multipliers that goes into the apparent quantity of money as the same dollar is used more often. Given the asset bubbles due the printing people are incentivized to invest into it so long as the bubble continues to grow (or at least not shrink) people are incentivized to keep holding. So you can keep printing money without seeing inflation so long as asset bubbles can soak it up and money velocity drops. Now when the reverse happens, which will happen eventually even if it takes a very long time, that is when you get inflation. So paradoxically increasing the base money supply enough to generate asset bubbles has a deflationary effect.

cjbgkagh 4y ago

The 'excess' money was soaked up into asset bubbles not measured by most inflation indexes, or at least under weighted. Which is fine until people sell those assets and spend the money which they have to do eventually.

rightbyte 4y ago

Trickle down economy you know. Of all these house millionaires you need to sell your house and move somewhere cheaper to actually benefit. It takes time until enough people cashes out to move the needle.

refurb 4y ago

Money velocity is an important part of inflation as well. Back in 2008 during the financial crisis, the Fed printed a ton of money and used it to buy crappy mortgages. However, banks were worried about solvency and the Fed was paying interest on reserves the bank kept with them - as a result the "extra" money never made it into the system right away. It's like trying to light a fire and when it doesn't start pouring more gasoline on it. It will eventually light, but if you've poured a ton of gas on it by then it's going to burn fast.

mrjin 4y ago

>there was no inflation. Of course, there was inflation but could not be reflected by CPI. Just look at the asset prices, can you explain the dramatic increasing? In the past, printed money mostly went to rich people and made asset prices skyrocketing. But this time is different, people live by paycheck got some chunk of it. And here we are.

WalterBright 4y ago

No inflation? https://www.in2013dollars.com/current-inflation-rate https://www.in2013dollars.com/current-inflation-rate Chart sez you're mistaken.

pmontra 4y ago
It seems that the chart proves my point: years of quantitative easing and inflation around our below 2% and economists complaining that they were failing to foster inflation and could not explain why.