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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. The
by 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 agoOnly 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.