9 ms·

The amount of money was increased by a factor of 6 since 2008: https://fred.stlouisfed.org/series/BOGMBASE https://fred.stlouisfed.org/series/BOGMBASE The amo

• quickthrowman 3y ago
  Monetary Base != Money Supply M2 money supply, please read the part where the formula changed in 2020: https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL > I know that most people say that M0 is only a small factor in price increase and other factors like credit given by banks, the speed at which money moves and spendin/saving behavior play a bigger role. But I doubt that. Please don’t take offense, but I doubt that you understand what you’re talking about given the fact that you confused monetary base and money supply.
  • kranke155 3y ago
    It’s a peak Hn comment. “I’m not an economist but here is my …” edit Joseph Stiglitz, Nobel Prize winning economist, has said that most of the inflation we saw was markups - ie firms raising their prices due to inadequate amount of competition. Here is an 50 min long talk on the subject https://www.youtube.com/watch?v=4BAsZIHp9HI&t=1217s https://www.youtube.com/watch?v=4BAsZIHp9HI&t=1217s
    • bcrosby95 3y ago
      Call Ripley's believe it or not, someone on the Internet is talking about something they aren't an expert in!
      • kranke155 3y ago
        HN is particularly arrogant about some subjects, because it seems like having read a few papers, some people think they know more than experts in the field. Often times they seem to have just read the papers that justify something they already believe in. Economics in particular is not a science and extremely dangerous one to have "opinions" about, since I feel like it's got a heavy ideological bent forced unto it due to political considerations. There are economists like Steve Keen and Joseph Stiglitz who seem to make sense to me, and then there seems to be a lot of gobblygook. But I'm not an expert nor would I say I categorically know what I'm talking about in this area. I just try my best to listen.
        • latency-guy2 3y ago
          > I just try my best to listen. > There are economists like Steve Keen and Joseph Stiglitz who seem to make sense to me, and then there seems to be a lot of gobblygook. Seems at odds. Even further when you say: > Often times they seem to have just read the papers that justify something they already believe in. Economics in particular is not a science and extremely dangerous one to have "opinions" about, since I feel like it's got a heavy ideological bent forced unto it due to political considerations. > HN is particularly arrogant about some subjects, because it seems like having read a few papers, some people think they know more than experts in the field. Apt. Just wish it would apply to you and not everyone else.
          • kranke155 3y ago
            I am quoting experts in the field, and using their own presentations on the subject. I am not an expert in economics, just an interested reader. It is entirely possible I am also falling victim to the same trap, that's not something I would ever deny. But repeating what you heard from an economist in a mainstream publication just leads to mostly repeating falsehoods, since economists who get heard in the mainstream media seem to me to be often ideological.
            • imtringued 3y ago
    • HEmanZ 3y ago
      These comments at least try to use real economics, even when amateur. Its refreshing when the vast majority of online discourse about inflation is just shouting “We have inflation because business are so much more greedy than they have EVER been!!!!”
      • kranke155 3y ago
        Joseph Stiglitz, Nobel Prize winning economist, has said that most of the inflation we saw was markups - ie firms raising their prices due to inadequate amount of competition. Here is an 50 min long talk on the subject https://www.youtube.com/watch?v=4BAsZIHp9HI&t=1217s https://www.youtube.com/watch?v=4BAsZIHp9HI&t=1217s Let me know where he's wrong.
        • HEmanZ 3y ago
          I’m not sure what argument you think I’m making, what argument you think he’s making, and what argument you think you’re making, that deserves a mic drop. His point is basically that the most recent inflation was caused by a supply shock and high uncertainty, not aggregate demand from fiscal policy, and that broad monetary tightening is a worse strategy for calming this kind of inflation than <insert set of> targeted policies. None of this is “evil corporation have monopoly.” The example he even uses for service side under-supply is a local mechanic, hardly what people think of as “big business monopoly” He was wrong about not getting real wage growth, which did appear just months after this was posted, and is now back on track. But it’s not key to his argument, just an interesting thing I noticed.
          • kranke155 3y ago
            Ah fair. You actually watched it! I watched it months ago and I had the idea that he said that most of inflation was markups due to lack of competition. But I might be thinking of someone else, like Steve Keen.
        • refurb 3y ago
          You know how else is a Nobel Prize winner in economics? Paul Krugman Don't fall for the "appeal to authority" fallacy.
    • DeathArrow 3y ago
      >firms raising their prices due to inadequate amount of competition. In a free market you can't have an inadequate amount of competition. If he is right, it means that regulations hampered competition.
      • adrianN 3y ago
        There are no free markets outside of econ 101.
        • Jensson 3y ago
          So why didn't prices rice before covid? Something changed, and it wasn't companies suddenly being more greedy.
          • kranke155 3y ago
            The supply shock led to an increase in prices, which then led them to realising they could increase the prices even more.
          • adrianN 3y ago
            What regulations that hinder competition have been added since Covid?
        • imtringued 3y ago
          In fact, one of the ways to anger a neoclassical economist is by arguing that inflation is impossible in an equilibrium economy with perfect information, because nobody is dumb enough to accept worthless money.
• kranke155 3y ago
  You should listen to Steve Keen on this subject. He doesn’t agree with you. He has a great podcast called Debunking Economics.
  • spaceman_2020 3y ago
    Nothing else explains the global rise in luxury spending and the global cost of living crisis. Steve Keen can bring out all his charts and theories but the lived experience of the people tells a different story.
• naasking 3y ago
  > To me it seems those are all indirect, delayed outcomes of the money supply. Banks lending is an increase in the money supply.
  • pfannkuchen 3y ago
    (In a fractional reserve banking system)
  • mg 3y ago
    When you lend money from a bank, you will not spend it on fancy restaurant visits. Because you know you will have to pay it back. When you own a house and there is a cafe in that house which pays rent even though it is closed, because it gets the money from some governmental covid assistance program, then you do not have to pay the money back and can spend it consumer goods and drive prices up.
    • tmn 3y ago
      "When you lend money from a bank, you will not spend it on fancy restaurant visits. Because you know you will have to pay it back." This doesn't reflect consumer behavior. Just consider a simple example ignoring future income. Say I have 520k. I buy a 500k house. Scenario 1. I buy it with cash and I have 20k left. Scenario 2. I buy it with a mortgage (20% down), and how have 420k left. It's easy to see why those in scenario 2 would continue to fund lifestyle choices like eating out. The reality that they need to pay back that debt gets moved to the future. The future also provides additional income. So the need to pay it back gets delayed, meaning money available now is freed up for lifestyle choices.
      • s1artibartfast 3y ago
        I think it is hard to get much insight from these "just so" stories because so much is dependent on the circumstances and counterfactual. I think is reasonable to think that low interest rates pulls consumer spending from the future into the present, when compared to higher interest on lending. High inflation also spurs consumer spending because the return on savings is less. back to housing, My experience is that personal spending is waaay down after buying a house, because I now need to service 1.2M of debt every year, which is about 80k.
• lfmunoz4 3y ago
  I get the sense that people increase prices just because everyone else is increasing prices. Even if nothing increased for you since "everything" is increasing might as well increase because now is when you can get away with it.
  • castlecrasher2 3y ago
    It's not really a "get away with it" when you need more to afford the other increasing prices, though.
  • chongli 3y ago
    Prices increase when costs go up. If you’re selling widgets and your wholesale price goes up, you have to increase the retail price or your margins drop.
    • kcatskcolbdi 3y ago
      > Prices increase when costs go up I'd contend that costs going up is _a_ cause of price increases. The reason a soda costs more from a movie theater than a supermarket is not because a soda costs more to make in the movie theater, for instance.
    • Naijoko 3y ago
      For example the price of Art is judged by the buyer. There is no production cost or whatever.
    • burkaman 3y ago
      Prices increase when a seller increases them. That could be because their costs went up, but it also could just be because they felt like people would pay more.
      • chii 3y ago
        > because they felt like people would pay more. but if that was true, why did it happen only during the pandemic and not before? At any point in time, if a business felt like their customer could've paid more, the business should be increasing that price. So the recent price rises cannot be explained with this train of argument. Unless, of course, the pandemic somehow made it so that people could pay more.
• username332211 3y ago
  > Most people think that M0 is only a small factor in price increase and other factors like credit given by banks, the speed at which money moves and spending/saving behavior play a bigger role. Well, what you seem to be describing is M2, aka actual money available for spending. Which is a rather large factor in the general price level.
  • kcatskcolbdi 3y ago
    Yes, the parent comment is describing M2. Do you have any rationale for why you believe it is a large factor in general price levels?
    • username332211 3y ago
      MV=PY?
      • HDThoreaun 3y ago
        What about V though?
  • mg 3y ago
    No. That is exactly my point: That the change in M0 is the source of increased prices, not changes to M2 (apart from the changes that are in M2 because M0 is in M2). Think about it this way: How can M2 increase without M0 also increasing? Then we can look at those mechanisms and determine if they are to "blame" for the recent price increases. I think they are not.
    • Naijoko 3y ago
      Isnt the whole point of economical growth that m2 will be more money than m0? Isnt it increasing by trade?
    • imtringued 3y ago
      >Think about it this way: How can M2 increase without M0 also increasing? It is quite simple. There are no reserve requirements anymore.
• marcosdumay 3y ago
  There are lots and lots of factors that can change the rate between government issued money and money available for consumers. Most of them wouldn't make the news even if the news cared about discussing anything in depth. But the thing is, historically most governments kept those factors well regulated so that the government had a coarse control over that ratio. (A noisy but effective control.) But at the 2000's crisis, the US decided to loose their regulations so that there the ratio is completely defined by the market. What that means is that no, it's not obvious that the dollar inflation is coming from the inflated money supply. But that's a problem by itself.
  • laurencerowe 3y ago
    Inflation has been very low since the 1990s. The worry after the 2008 bank crisis was deflation. I suspect our recent blip in inflation which has now largely passed is a result of the covid supply shock. https://tradingeconomics.com/united-states/inflation-cpi https://tradingeconomics.com/united-states/inflation-cpi (click max)
    • chung8123 3y ago
      Inflation has been hidden with outsourcing since the 90's. By moving manufacturing overseas the price of a lot of goods decreased while the items that you cannot outsource increased (Services, Healthcare, Education, Housing).
    • User23 3y ago
      > Inflation has been very low since the 1990s. Except for housing, food, healthcare, education, transportation, and energy. But yeah besides the eye watering increases in the prices of the things that make up the overwhelming majority of the typical household’s spending prices have barely increased. In fact you can get a bigger TV for less money!
      • nerdponx 3y ago
        Also shrinkflation, and reduction in baseline quality of various goods offsetting increased baseline quality in other areas.
• User23 3y ago
  > To me, it seems those are all indirect, delayed outcomes of the money supply. Why do you think that? Suppose that Treasury minted $100,000,000,000,000,000 in coins and locked them up in Fort Knox and never spent them. By what mechanism would that increase in the money supply drive up prices?
  • WalterBright 3y ago
    What do you think would happen if the Treasury decided to spend those coins?
    • User23 3y ago
      That depends on what they spend them on and what the recipient does with them. Which is, obviously, the exact point of the thought experiment. It’s not the existence of money, no matter how great the amount, that drives inflation, it’s the spending thereof. And it’s not just mere spending either, but how it’s spent matters. One of the reasons the government has been able to issue trillions of new dollars a year for the past decade and a half with relatively little inflation is that most of that money was captured by a relatively small number of ultra high net worth persons who mostly hoard it and don’t appreciably change their expenditures except of course on finance assets, which observably have inflated like crazy. However, in 2020 when government started spending new money into the hands if average citizens then inflation started to skyrocket. I don’t understand why this is hard for people when it’s been so clearly observable. It’s a cautionary tale against letting ideology override evidence I suppose.
      • WalterBright 3y ago
        Rich people do not hoard cash. They invest it, all of it. Even money deposited in a bank account gets invested, as the bank loans it out. There are no Scrooge McDuck cash vaults.
        • User23 3y ago
          > Rich people do not hoard cash. They invest it, all of it. Did I not make that clear? I said that they "don’t appreciably change their expenditures except of course on finance (sic) assets, which observably have inflated like crazy." I dislike the lazy and misleading usage of "investing" for a simple asset swap of cash for already issued financial assets, even though that's what most people mean by the term. That is a savings reallocation. Investing is when you actually allocate new capital, so for example buying into an IPO, a public offering, angel investing, buying equipment, and so on. > Rich people do not hoard cash. They invest it, all of it. Even money deposited in a bank account gets invested, as the bank loans it out. Banks don't loan deposits, but rather loan origination creates deposits. You're a very smart guy, take some time to learn how the banking system actually works. > There are no Scrooge McDuck cash vaults. The Federal Reserve Bank of New York has entered the chat.[1] [1] https://www.newyorkfed.org/aboutthefed/goldvault.html https://www.newyorkfed.org/aboutthefed/goldvault.html
• spaceman_2020 3y ago
  Asset prices have certainly reflected this increase. The house my brother lives in was sold in 2011 for less than what the owners paid for it in 2006. Now, its up 2.5x from what he paid.
• imtringued 3y ago
  You do realize that commercial banks create most of the money in the economy and QE is merely the central bank flooding the banks with reserves to back the money they already created? Honestly, how can you be this dense. The difference in the past years wasn't QE or "money printing", it was that the government performed fiscal stimulus, which tends to put money into the hands of people more than letting their bank account be backed by government bonds. The Economics Explained yotuber made a video about how hyperinflation is already there using a similar graph and where is it exactly?