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How do we know inflation was due to the stimulus checks, and not due to supply chain issues caused by covid/Ukraine? IIUC, "European nations largely avoided the
by verteu 3y ago
How do we know inflation was due to the stimulus checks, and not due to supply chain issues caused by covid/Ukraine? IIUC, "European nations largely avoided the one-time payments" [1] but suffered the same inflation [2].
[1] https://fox8.com/news/stimulus-checks-how-much-money-did-people-in-other-countries-get/ https://fox8.com/news/stimulus-checks-how-much-money-did-peo...
[2] https://en.wikipedia.org/wiki/2021%E2%80%932023_inflation_surge#/media/File:Inflation_rate,_United_States_and_eurozone,_January_2018_through_June_2023.png https://en.wikipedia.org/wiki/2021%E2%80%932023_inflation_su...
Edit: After a bit more research, this is less clear -- many European countries provided large unemployment checks during covid.
- WalterBright 3y agoInflation is the result of creating money to fund the deficit, it is not caused by supply chain issues.
- tonyedgecombe 3y agoSupply chain issues definitely do cause inflation. Don't you remember what happened to car prices when the manufacturers couldn't buy enough chips for them?
- WalterBright 3y agoNow that they can buy enough, why is there no corresponding drop in car prices and deflation?
- tonyedgecombe 3y agoThey are: https://news.google.com/search?for=car+prices+dropping&hl=en-GB&gl=GB&ceid=GB%3Aen https://news.google.com/search?for=car+prices+dropping&hl=en...
- WalterBright 3y ago3 years of monthly increases, and a small one month drop. When they return to what they were 3 years ago, we can talk.
- verteu 3y agoNot true -- inflation can be caused by multiple things, including supply shocks or even future expectations of inflation ("wage price spiral"). It's Econ 101.
- WalterBright 3y agoYour Econ 101 professor is wrong. The proof is simple. Why did we not have deflation when the supply shocks ended? The value of money is subject to the Law of Supply and Demand like everything else is. Increase the number of dollars, and the value of a dollar goes down.
- verteu 3y agoProbably due to low unemployment [1]. Inflation has multiple causes. If it truly has a single cause ("creating money"), can you show a graph of "money created" vs inflation? I don't see much correlation between ∆M2 and inflation [2]. [1] https://en.wikipedia.org/wiki/Phillips_curve https://en.wikipedia.org/wiki/Phillips_curve [2] https://www.longtermtrends.net/m2-money-supply-vs-inflation/ https://www.longtermtrends.net/m2-money-supply-vs-inflation/
- WalterBright 3y agoLooks like they correlate to me.
- deleted 3y ago[deleted]
- tonyedgecombe 3y agoThe UK supported business payrolls directly rather than giving money to the general populace but we still have a problem with inflation.