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> You can pick any macroeconomy textbook and you'll see it written plainly that raising quickly the monetary supply leads to inflation. Mostly monetarist textb

> You can pick any macroeconomy textbook and you'll see it written plainly that raising quickly the monetary supply leads to inflation. Mostly monetarist textbooks: * https://en.wikipedia.org/wiki/Monetarism https://en.wikipedia.org/wiki/Monetarism Keynesian ones would probably emphasize the velocity of money: * https://en.wikipedia.org/wiki/Velocity_of_money https://en.wikipedia.org/wiki/Velocity_of_money Even though there was a lot of money supply creation in the US in the 2010s, where was negligible inflation (folks were actually complaining it was too low). Why was that? Well look at what happened to velocity in the 2010s: * https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V Looking at money supply statistics is useless. A good analogy by Cullen Roche: > But also – why do so many people insist that inflation is an increase in the money supply? This makes zero sense. Here’s why – our economy is mostly a credit based economy. So, if I take out a loan for $100,000 then the money supply has technically increased by $100,000. But what if I don’t actually tap that loan? What if I borrow the money because, for instance, house prices just went up 25% and I want to have some cash around for emergencies? This doesn’t tell us anything about prices, living standards or really anything. But this is what so much of the money supply represents – money that has been issued and is just sitting around unused. Why is this useful? It’s like calculating your weight changes by counting how much food you have in your refrigerator. No. That’s potential calories consumed and potential weight gain. The amount of food in your fridge tells you little about your future weight changes just like the amount of money in the economy tells us little about the actual price changes in the economy. * https://www.pragcap.com/three-things-i-think-i-think-i-see-dead-mutual-funds/ https://www.pragcap.com/three-things-i-think-i-think-i-see-d... The money supply in Japan has been steadily going up for decades, and yet their inflation rate has been flat (going negative more than once) in the same time period: * https://fred.stlouisfed.org/graph/?g=1680i https://fred.stlouisfed.org/graph/?g=1680i The idea of more money supply -> more inflation is contradicted by the historical data. Even Milton Friedman recanted the idea (Financial Times (UK), June 7, 2003): > The use of quantity of money as a target has not been a success. I'm not sure that I would as of today push it as hard as I once did.

phpisthebest 3y ago
>>Even though there was a lot of money supply creation in the US in the 2010s, where was negligible inflation (folks were actually complaining it was too low). Why was that? If you look instead of Price inflation, and instead shift of Market Inflation you will see most of the money supply creation directly lead to stock price inflation and laregely lead to a huge bubble in the stock market (that is largely still there) where basic fundmentals of a company did not matter to the stock prices. You see the rise of alot of highly unprofitable companies which under normal conditions would mean lowering of their stock value but instead their stocks were still going you QE and other fed programs where designed to ensure market inflation, and that is where most of that money supply went, not to mainstreet which is where you would see CPI increases Come to COVID and the money supply creation was done in direct transfers to Mainstreet, and almost immediately we seed CPI go nuts...
- throw0101a 3y ago
  > If you look instead of Price inflation, and instead shift of Market Inflation you will see most of the money supply creation directly lead to stock price inflation and laregely lead to a huge bubble in the stock market (that is largely still there) where basic fundmentals of a company did not matter to the stock prices. There was (so-called) 'market inflation' in the 1920s when the US was still on the gold standard and so the money supply was fixed. See also: * https://en.wikipedia.org/wiki/Panic_of_1873 https://en.wikipedia.org/wiki/Panic_of_1873 And also: * https://en.wikipedia.org/wiki/Canal_Mania https://en.wikipedia.org/wiki/Canal_Mania * https://en.wikipedia.org/wiki/Railway_Mania https://en.wikipedia.org/wiki/Railway_Mania The supply of money has no relation to the existence of stock bubbles.

phpisthebest 3y ago

>>Even though there was a lot of money supply creation in the US in the 2010s, where was negligible inflation (folks were actually complaining it was too low). Why was that? If you look instead of Price inflation, and instead shift of Market Inflation you will see most of the money supply creation directly lead to stock price inflation and laregely lead to a huge bubble in the stock market (that is largely still there) where basic fundmentals of a company did not matter to the stock prices. You see the rise of alot of highly unprofitable companies which under normal conditions would mean lowering of their stock value but instead their stocks were still going you QE and other fed programs where designed to ensure market inflation, and that is where most of that money supply went, not to mainstreet which is where you would see CPI increases Come to COVID and the money supply creation was done in direct transfers to Mainstreet, and almost immediately we seed CPI go nuts...

throw0101a 3y ago
> If you look instead of Price inflation, and instead shift of Market Inflation you will see most of the money supply creation directly lead to stock price inflation and laregely lead to a huge bubble in the stock market (that is largely still there) where basic fundmentals of a company did not matter to the stock prices. There was (so-called) 'market inflation' in the 1920s when the US was still on the gold standard and so the money supply was fixed. See also: * https://en.wikipedia.org/wiki/Panic_of_1873 https://en.wikipedia.org/wiki/Panic_of_1873 And also: * https://en.wikipedia.org/wiki/Canal_Mania https://en.wikipedia.org/wiki/Canal_Mania * https://en.wikipedia.org/wiki/Railway_Mania https://en.wikipedia.org/wiki/Railway_Mania The supply of money has no relation to the existence of stock bubbles.