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Usually increasing money supply creates demand for new businesses. Under normal economic times this isn't inflationary because supply increases with growth in m
by mempko 1y ago
Usually increasing money supply creates demand for new businesses. Under normal economic times this isn't inflationary because supply increases with growth in money. It's inflationary only if there are resource constraints (think covid).
It even says so in the article you linked.
- jaredklewis 1y agoI guess I would agree if there were no resource constraints, money supply increase wouldn't be inflationary, except I think there are resource constraints. US is basically at full employment. Labor is a very constrained resource and quite inelastic (for example, it takes ~30 years to grow and train a new doctor). Housing supply in the US is increasing, but the timelines here are glacial. I don't see how increasing the money supply won't increases wages and land values. And labor and land pretty much feed into the costs of everything else. Sure, a few things which are mostly imported or automated (t-shirts, some commodities, etc...) might be relatively stable in price, but the bulk of household budgets isn't t-shirts. It's stuff like housing and services (healthcare, education, etc...); if wages and land prices go up, housing and services get more expensive.