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The money supply gets brought up in every single discussion around inflation on this forum, and it’s obviously relevant. However inflation!= growth in the mone

The money supply gets brought up in every single discussion around inflation on this forum, and it’s obviously relevant. However inflation!= growth in the money supply. A lot of the reasoning behind that growth was because inflation was persistently below the 2% target for the entire period up until 2021. That’s two decades of stubbornly low inflation, despite the feds best efforts in juicing the money supply. It’s maddening how common it is for this forum to treat the issue as so simplistic and formulaic as though policymakers are somehow dunces compared to software engineers.

gunshai 4y ago
What is consistently lost in the M2 supply talking point is the demand aspect of currency. One of the reasons why the M2 supply increasing wouldn't directly correlate to inflation has to do with global demand to hold the asset in reserve. So the argument I don't think is bad, just misguided in the sense that once the global demand for currency reserve is saturated the party is over for increase in supply with out a very direct affect on inflation.
- comte7092 4y ago
  It is absolutely relevant, and I’d be fine with the discussion of if included your level of nuance. However it usually is a more simplistic conversation that glosses over the challenges of actually making policy at the fed.
kebman 4y ago
It's called the Cantillon Effect. And there usually is a delay from implementation to experienced effect. After 2020 the money printing was excessive, and it almost immediately lead to unprecedented growth in the stock market. Now, however, the delayed effect of that party is leading to unprecedented growth in food and energy prices, which affects the lives of everyone.
- comte7092 4y ago
  Correct, however parent comment wasn’t referring solely to 2020, they explicitly went back to 2000. Hence why I spoke to the whole period in my comment.
galangalalgol 4y ago
The GP specifically mentioned bread prices too, and for that surely supply due to the war is also a factor. Food supply limitations, shipping being threatened near Iran, trading partners being asked to pick sides. This is all very similar to the picture Zeihan depicts in his stuff. Unnerving.

gunshai 4y ago

What is consistently lost in the M2 supply talking point is the demand aspect of currency. One of the reasons why the M2 supply increasing wouldn't directly correlate to inflation has to do with global demand to hold the asset in reserve. So the argument I don't think is bad, just misguided in the sense that once the global demand for currency reserve is saturated the party is over for increase in supply with out a very direct affect on inflation.

comte7092 4y ago
It is absolutely relevant, and I’d be fine with the discussion of if included your level of nuance. However it usually is a more simplistic conversation that glosses over the challenges of actually making policy at the fed.

kebman 4y ago

It's called the Cantillon Effect. And there usually is a delay from implementation to experienced effect. After 2020 the money printing was excessive, and it almost immediately lead to unprecedented growth in the stock market. Now, however, the delayed effect of that party is leading to unprecedented growth in food and energy prices, which affects the lives of everyone.

comte7092 4y ago
Correct, however parent comment wasn’t referring solely to 2020, they explicitly went back to 2000. Hence why I spoke to the whole period in my comment.

galangalalgol 4y ago

The GP specifically mentioned bread prices too, and for that surely supply due to the war is also a factor. Food supply limitations, shipping being threatened near Iran, trading partners being asked to pick sides. This is all very similar to the picture Zeihan depicts in his stuff. Unnerving.