> * When more money chases the same basket of goods and services, the money loses value (which is what inflation is).* Now do Japan: * https://fred.stlouisfed

> * When more money chases the same basket of goods and services, the money loses value (which is what inflation is).* Now do Japan: * https://fred.stlouisfed.org/graph/?g=1680i https://fred.stlouisfed.org/graph/?g=1680i Increasing money supply, low inflation (and more than on period of deflation). The problem with looking at money supply is that you don't bother looking at what the money is doing: > 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. > Sometimes I feel like people read some econ 101 and the admittedly intuitive idea that inflation is “always and everywhere a monetary phenomenon”, but didn’t stop to think that it might be a lot more complex than that. * 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 problem with Monetarists is that they ignore the velocity of money.