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The ballooning money supply may be the key to unlocking inflation in the U.S.

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Re: The ballooning money supply may be the key to unlocking inflation in the U.S.

#231

Post by dogman144 »

SonOfThePlower wrote: post #172
freeone3000 wrote: post #115

Earlier quoted context omitted.

Inflation (in the consumer goods sense) only happens when the value of money goes down for the average person. The price of lettuce isn't going to rise because the fed isn't buying lettuce with faerie money, they're buying securities. And the stock market has gone up and to the right, despite all logical indicators on the ground indicating it should go solidly opposite. Securities are hugely inflated.

FED buys MBSes and bonds. FED does not buy neither lettuce nor stocks.

There are some rumors this happened at the bottom of the '07/'08 crashes. A few traders swear something held the bottom.

Re: The ballooning money supply may be the key to unlocking inflation in the U.S.

#232

Post by throw0101a »

mgh2 wrote: post #210

What inflation rate? These two sources of data show not much difference 1. https://www.statista.com/statistics/244983/projected-inflati... 2. https://www.usinflationcalculator.com/inflation/current-infl...

> What inflation rate?

Official:

* https://www.bls.gov/cpi/

It should be noted there are actually different calculation, but generally "Core" is what people are referring to:

* https://en.wikipedia.org/wiki/United_States_Consumer_Price_I...

Re: The ballooning money supply may be the key to unlocking inflation in the U.S.

#233

Post by marcosdumay »

skybrian wrote: post #155
pedro_hab wrote: post #106

Earlier quoted context omitted.

This is the new definition, in old dictionaries inflation was defined as increase in money supply. Using products to measure inflation, is a terrible mistake in my estimation, because cost has been falling, so stable prices don't mean no inflation. It just means the governments got wise to just take what they can get without being noticed.

It was once thought that the money supply was directly related to inflation, but they were never the same thing. The classic equation was MV = PY, and M (the money supply) and P (the price level) are different . They are only proportional (according to this equation) if everything else remains the same. In any case, the "money supply" is an abstract macroeconomic variable with multiple possible definitions. Why do we…

People being priced out of productive investments has consequences too. Those are not the same "the sky is falling, everybody is poor now!" consequences of consumer products inflation¹, but they exist and are important for a healthy society.

1 - What an incredible new definition of monetary inflation we have now, that can be split over real markets without any loss of meaning.

Re: The ballooning money supply may be the key to unlocking inflation in the U.S.

#234

Post by FooHentai »

keeganpoppen wrote: post #146
diob wrote: post #60

Earlier quoted context omitted.

Right, I've posted this before, but long term wealth building is becoming too expensive for the average person. The only reason food hasn't become too expensive is wealthy people don't have a reason to go out and buy up all the food. They do, on the other hand, have reason to go out and invest. This is, however, starting to fall apart for goods that don't normally have reason to be bought up. In other words, folks wi…

> The only reason food hasn't become too expensive is wealthy people don't have a reason to go out and buy up all the food sometimes i get the idle premonition that if they started trying to do this tomorrow they could do a shockingly good job , to the point that you could almost claim that the only thing holding together social order at this point is that they are not. not saying i believe this-- i don't even really…

On the one hand, it's a bit of a cyclical argument - The only thing holding together social order is social order. On the other, the same is true of anything which is relied upon on for life and dependent on ongoing financial exchange - Food, water, housing (if you rent). If a lot of excess capital suddenly flooded into those markets and gobbled up stock/pushed up demand, joe average could be priced out.

All kinds of chaos manifests when that happens. Look at nations that experienced hyperinflation for examples of how it might go.

What's not so clear is what might prompt it to happen.

Re: The ballooning money supply may be the key to unlocking inflation in the U.S.

#235

Post by anm89 »

atwebb wrote: post #10

I'm admittedly new to this but there is mention that the supply should double every 10 years, which it looks like it hasn't (or just right at), are we playing catch up? Is the 10 year from an inflation target? 2004 - 2014 was an 80% growth. 2001 - 2011 was 60% growth 2011 it was 9600, today it is around 18k, seems like we're on track to 2021 and playing catchup. What am I not understanding? https://fred.stlouisfed.or…

Any average including 2008-2011, is not a meaningful way to think about what is average historically in terms of US monetary supply.

That period was the beginning of a paradigm shift in terms of how the US enacted monetary policy, which was on top of another paradigm shift that had occurred with the Greenspan Era.

Which is to say we are in extremely uncharted territory. If you took average measurements of a star in the initial periods of a supernova, you would get a very strange understanding of what is average for that star although technically the figures would be valid averages.

Re: The ballooning money supply may be the key to unlocking inflation in the U.S.

#236

Post by jganetsk »

roenxi wrote: post #227
jganetsk wrote: post #129

Earlier quoted context omitted.

No. I think what the poster is saying is that running a government deficit is printing money. Fiscal policy is money printing, not monetary policy. This is very much not what is colloquially known as money printing, rather it's the basis of modern money theory. Monetary policy is just swapping one kind of USD denominated assets for another. It doesn't really change the size of private bank balance sheets, hence it is…

When the government borrows money like the US does, then it is setting itself up to either run a hefty surplus or go with money printing. Both of those are pretty unpleasant for someone (either borrowers or savers). So yes, fiscal policy is where the eventual pain is locked in. But, and I feel there is being something lost to semantics in this thread, we have an article reporting "the U.S. money supply has grown 20%"…

I'm not saying that we didn't print money this year. I'm arguing over how we measure the quantity of the money supply. I am saying that government debt = the quantity of money.

"The federal government ran a budget deficit of $3.1 trillion in fiscal year 2020, CBO estimates, more than triple the shortfall recorded in 2019"

By my definition, we did print $3.1 trillion of money this year.

I don't go by the size of the Fed balance sheet as money supply. There are many reasons for this, and plenty of people on this thread are trying to explain this view point.

Re: The ballooning money supply may be the key to unlocking inflation in the U.S.

#237

Post by LuvSauce »

lordnacho wrote: post #214

I don't often write meta-comments, but it's interesting to see the two large threads here. One of them is about whether the Fed is printing money. The other one is about what inflation is, or how it ought to be measured. I find it fascinating that there's so much confusion about all these economic terms. I don't have a simple answer to either, but it's thought provoking that there isn't an established theory that eve…

It is said that keynesians and free market economists both would find themselves at the ire of other intellectuals. Taleb lamented that economists are rated by other economists so we can't be sure they're correct. Even the greatest economist said that economists are not reliable.

Re: The ballooning money supply may be the key to unlocking inflation in the U.S.

#238

Post by [deleted] »

jariel wrote: post #51
alexjray wrote: post #23

The fed has pumped 2.3 trillion dollars into the economy in the past six weeks.... I don't see how the dollar won't crash eventually. Why would foreign countries still buy US bonds?

Because everywhere else is a little worse. You can loose 2% in the US, but 10% in Italy. So what do you want to do? If this crisis were specific to the US, things would be different. Also, with seigneurage of the US dollar, it gives a lot of elasticity to the process. Put another way 'The USD is also a big international currency that everyone else depends on somewhat'.

[deleted]

Re: The ballooning money supply may be the key to unlocking inflation in the U.S.

#239

Post by x87678r »

Inflation has been here for a while, house prices have exploded, education and healthcare are unaffordable too. Sure TVs, cars and clothes have reduced in price so now they really make a tiny impact on your budget. The real problem is CPI isn't reflecting the real world.

Re: The ballooning money supply may be the key to unlocking inflation in the U.S.

#240

Post by cynicalkane »

marcosdumay wrote: post #223
lordnacho wrote: post #214

I don't often write meta-comments, but it's interesting to see the two large threads here. One of them is about whether the Fed is printing money. The other one is about what inflation is, or how it ought to be measured. I find it fascinating that there's so much confusion about all these economic terms. I don't have a simple answer to either, but it's thought provoking that there isn't an established theory that eve…

Monetary theory has some very well defined concepts. But those only appear on the equations, and when people go naming them they go and mix with the same names they use on unrelated discussions. And then we get some completely ridiculous things like people arguing that the Keynes return of investments apply to each investment inside an economy.

I don't think this is exactly it. One can try -- and try fruitfully, for these theories have been useful in practice -- to match 'money' and 'inflation' and 'debt', in their macro senses, to everyday experience, with the caveat that they're aggregate concepts that affect individuals and various productive activities differently, and that they (money especially) can behave a little weird.

What happens instead is that people have feelings about what these concepts are supposed to mean, and then use that to make a political statement. The reason armchair- and pseudo-economists are so eager to say things like "Money is really about X" or "Money is really about the opposite of X" is they want to hijack the word 'money' and the meaning it has in the brain and turn that into politics.

These confident takes are more directly engaging, whereas economic pronouncements are wonky and weird in a way that's more relatively neutral or at least not obviously political, so the gravitation is towards the bad and confusing takes.

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