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It's both. The money supply grew enormously to fund the Corona shutdowns. You can see it clearly on a graph of M2. https://fred.stlouisfed.org/series/WM2NS htt

It's both. The money supply grew enormously to fund the Corona shutdowns. You can see it clearly on a graph of M2. https://fred.stlouisfed.org/series/WM2NS https://fred.stlouisfed.org/series/WM2NS Such a fast increase in such a short amount of time is extremely unusual, perhaps unprecedented. There's nothing even remotely close to that instant increase since the dataset begins at the start of the 1980s. And then the COVID jump didn't only make a huge increase by itself, but the slope of the graph permanently increased. It's basic economics that if you do that to the money supply you will get a massive jump in inflation.

albatross13 4y ago
Since you seem to know your stuff, can you give me a slight tl;dr on the consequences of M1 and M2? M1 also shot way up: https://fred.stlouisfed.org/series/M1SL https://fred.stlouisfed.org/series/M1SL
- native_samples 4y ago
  Well, these are measures of the money supply. If the Fed "prints" money, then M1/M2 go up to reflect that. And they went up a lot. M2 went up by 40%, M1 it's harder to say because they adjusted the definition exactly at the time they started printing tons of stimulus money (what a coincidence). But it's definitely grown by a vast amount. The consequences of money printing are extremely basic and well known since antiquity. You get both inflation and, less well discussed but more important, consequent distortion of production in the currency zone as resources are reallocated to wherever the newly printed money enters the economy. The Edict of Diocletian was an example of this from Roman times [1]. Unfortunately, in the last few years we've seen something very disturbing. Central bankers, who are theoretically chosen for their command of economics, have become delusional about this and started arguing that actually money printing doesn't create inflation at all [2]: "But the current Fed chair, Jerome H. Powell, has dismissed claims that the Fed’s money-printing is fueling today’s price spiral, emphasizing instead the disruptions associated with reopening the economy. Like his most recent predecessors, dating to Alan Greenspan, Powell says that financial innovations mean there no longer is a link between the amount of money circulating in the economy and rising prices." This is economic illiteracy and sets us on the path to absolute ruin. If it were true then after the economy had "re-opened" (whatever that means) we'd experience deflation as prices re-adjusted back to their pre-pandemic norms, but no such deflation will ever happen, because inflation is "always and everywhere a monetary phenomenon".[3] In my view it's all a part of the same package of social phenomena you might call "government expertise failure". Anywhere you have the perception of expertise (whether justified or not), you create people who are incentivized to abuse that perception. Governments are filled with technocrats who claim to fully understand and control large systems, but their statements and beliefs seem to have been departing from what's actually correct at an ever higher rate. We are now all paying the price for their delusions at the checkout. [1] https://en.wikipedia.org/wiki/Edict_on_Maximum_Prices https://en.wikipedia.org/wiki/Edict_on_Maximum_Prices [2] https://www.washingtonpost.com/business/2022/02/06/federal-reserve-inflation-money-supply https://www.washingtonpost.com/business/2022/02/06/federal-r... [3] https://www.heritage.org/budget-and-spending/heritage-explains/the-real-story-behind-inflation#:~:text=Milton%20Friedman%20famously%20said%3A%20%E2%80%9CInflation,spending%20priorities%2C%20and%20recently%20the https://www.heritage.org/budget-and-spending/heritage-explai...
ameister14 4y ago
I mean...50% of the increase since April 2020 is the addition of OCD's to M1, isn't it? Why wouldn't it be better to look at the total monetary base?

albatross13 4y ago

Since you seem to know your stuff, can you give me a slight tl;dr on the consequences of M1 and M2? M1 also shot way up: https://fred.stlouisfed.org/series/M1SL https://fred.stlouisfed.org/series/M1SL

native_samples 4y ago
Well, these are measures of the money supply. If the Fed "prints" money, then M1/M2 go up to reflect that. And they went up a lot. M2 went up by 40%, M1 it's harder to say because they adjusted the definition exactly at the time they started printing tons of stimulus money (what a coincidence). But it's definitely grown by a vast amount. The consequences of money printing are extremely basic and well known since antiquity. You get both inflation and, less well discussed but more important, consequent distortion of production in the currency zone as resources are reallocated to wherever the newly printed money enters the economy. The Edict of Diocletian was an example of this from Roman times [1]. Unfortunately, in the last few years we've seen something very disturbing. Central bankers, who are theoretically chosen for their command of economics, have become delusional about this and started arguing that actually money printing doesn't create inflation at all [2]: "But the current Fed chair, Jerome H. Powell, has dismissed claims that the Fed’s money-printing is fueling today’s price spiral, emphasizing instead the disruptions associated with reopening the economy. Like his most recent predecessors, dating to Alan Greenspan, Powell says that financial innovations mean there no longer is a link between the amount of money circulating in the economy and rising prices." This is economic illiteracy and sets us on the path to absolute ruin. If it were true then after the economy had "re-opened" (whatever that means) we'd experience deflation as prices re-adjusted back to their pre-pandemic norms, but no such deflation will ever happen, because inflation is "always and everywhere a monetary phenomenon".[3] In my view it's all a part of the same package of social phenomena you might call "government expertise failure". Anywhere you have the perception of expertise (whether justified or not), you create people who are incentivized to abuse that perception. Governments are filled with technocrats who claim to fully understand and control large systems, but their statements and beliefs seem to have been departing from what's actually correct at an ever higher rate. We are now all paying the price for their delusions at the checkout. [1] https://en.wikipedia.org/wiki/Edict_on_Maximum_Prices https://en.wikipedia.org/wiki/Edict_on_Maximum_Prices [2] https://www.washingtonpost.com/business/2022/02/06/federal-reserve-inflation-money-supply https://www.washingtonpost.com/business/2022/02/06/federal-r... [3] https://www.heritage.org/budget-and-spending/heritage-explains/the-real-story-behind-inflation#:~:text=Milton%20Friedman%20famously%20said%3A%20%E2%80%9CInflation,spending%20priorities%2C%20and%20recently%20the https://www.heritage.org/budget-and-spending/heritage-explai...

ameister14 4y ago

I mean...50% of the increase since April 2020 is the addition of OCD's to M1, isn't it? Why wouldn't it be better to look at the total monetary base?