3 ms·

Money growth and inflation has no direct connection. It can impact it but doesn't have to. In europe the inflation was caused by the supply chain crisis: https:

Money growth and inflation has no direct connection. It can impact it but doesn't have to. In europe the inflation was caused by the supply chain crisis: https://www.ecb.europa.eu/press/key/date/2023/html/ecb.sp230925_1~7ad8ef22e2.en.html https://www.ecb.europa.eu/press/key/date/2023/html/ecb.sp230... Additionally some experts say that the inflation was bigger in Europe because the governments didn't do investments with new debt.

georgeplusplus 2y ago
that’s the governments in the EU deflecting blame and not admitting they messed up telling people to stay home, in some countries up to a year, and then paying those people to stay home (literally money printing) that it had no direct influence on inflation or wasa primary driver of it. I mean you’d have to be completely stupid to believe that what they did had no impact on inflation.
- ifwinterco 2y ago
  It's definitely controversial and in the short term it's probably dwarfed by other factors (velocity of money and external factors), but it stands to reason that if M1 increases by 300% while population remains roughly static and GDP increases by 50%, in the long run there will be inflation. If tripling the amount of base money has no effect then logically destroying 70% of the base money would also have no effect, but I never see people advocating that
_heimdall 2y ago
The original definition of inflation was literally an increase in the money supply. Economists only changed the term to mean an increase in prices when they also latched onto the idea that they can print new money and inject it into the system without consequence.
- okasaki 2y ago
  Why would it matter what the original definition was?
  - _heimdall 2y ago
    It seems relevant when the GP claim is that money growth and inflation have no connection. The definition was changed only because economists decided inflating the money supply was a brilliant economic policy and the old definition became inconvenient. When you realize they changed the definition only for better optics it's easier to question the underlying principles.
    - roenxi 2y ago
      > The definition was changed only because economists decided inflating the money supply was a brilliant economic policy and the old definition became inconvenient. That probably isn't true, both because it isn't that obvious that the economists thought it was a good idea or that they were the ones who changed the definition. "Economists" don't have any power over anything and the consensus position seems to tend towards disagreement with government policy. Inflation is one of those topics where there seems to be a dearth of actual economic evidence bought to the conversation. The policy justification in the public discourse tends towards just-so stories.
      - _heimdall 2y ago
        https://www.clevelandfed.org/publications/economic-commentary/1997/ec-19971015-on-the-origin-and-evolution-of-the-word-inflation https://www.clevelandfed.org/publications/economic-commentar... This is a good overview of the history of the term "inflation." Ideally people would specify which inflation they're referring to, like monetary Inflation or price inflation. Short of that though, until we started moving to full fiat currencies inflation without any qualifier was inflation of the money supply. After the move to fiat they repurposed the braod term to mean price inflation, presumably because monetary inflation isn't meaningful when your system is based entirely on manipulating the money supply.
  - hartator 2y ago
roenxi 2y ago
> In europe the inflation was caused by the supply chain crisis Then we'd expect to see deflation when the supply chain crisis is resolved - which seems unlikely but I suppose it cannot yet be ruled out. I doubt anyone will be held accountable if that deflation doesn't materialise though. It is an interesting question where CPI inflation is supposed to be coming from if not inflation in the money supply.

georgeplusplus 2y ago

that’s the governments in the EU deflecting blame and not admitting they messed up telling people to stay home, in some countries up to a year, and then paying those people to stay home (literally money printing) that it had no direct influence on inflation or wasa primary driver of it. I mean you’d have to be completely stupid to believe that what they did had no impact on inflation.

ifwinterco 2y ago
It's definitely controversial and in the short term it's probably dwarfed by other factors (velocity of money and external factors), but it stands to reason that if M1 increases by 300% while population remains roughly static and GDP increases by 50%, in the long run there will be inflation. If tripling the amount of base money has no effect then logically destroying 70% of the base money would also have no effect, but I never see people advocating that

_heimdall 2y ago

The original definition of inflation was literally an increase in the money supply. Economists only changed the term to mean an increase in prices when they also latched onto the idea that they can print new money and inject it into the system without consequence.

okasaki 2y ago
Why would it matter what the original definition was?
- _heimdall 2y ago
  It seems relevant when the GP claim is that money growth and inflation have no connection. The definition was changed only because economists decided inflating the money supply was a brilliant economic policy and the old definition became inconvenient. When you realize they changed the definition only for better optics it's easier to question the underlying principles.
  - roenxi 2y ago
    > The definition was changed only because economists decided inflating the money supply was a brilliant economic policy and the old definition became inconvenient. That probably isn't true, both because it isn't that obvious that the economists thought it was a good idea or that they were the ones who changed the definition. "Economists" don't have any power over anything and the consensus position seems to tend towards disagreement with government policy. Inflation is one of those topics where there seems to be a dearth of actual economic evidence bought to the conversation. The policy justification in the public discourse tends towards just-so stories.
    - _heimdall 2y ago
      https://www.clevelandfed.org/publications/economic-commentary/1997/ec-19971015-on-the-origin-and-evolution-of-the-word-inflation https://www.clevelandfed.org/publications/economic-commentar... This is a good overview of the history of the term "inflation." Ideally people would specify which inflation they're referring to, like monetary Inflation or price inflation. Short of that though, until we started moving to full fiat currencies inflation without any qualifier was inflation of the money supply. After the move to fiat they repurposed the braod term to mean price inflation, presumably because monetary inflation isn't meaningful when your system is based entirely on manipulating the money supply.
- hartator 2y ago

roenxi 2y ago

> In europe the inflation was caused by the supply chain crisis Then we'd expect to see deflation when the supply chain crisis is resolved - which seems unlikely but I suppose it cannot yet be ruled out. I doubt anyone will be held accountable if that deflation doesn't materialise though. It is an interesting question where CPI inflation is supposed to be coming from if not inflation in the money supply.