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The Ultimate Guide to Inflation

lynalden.com

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Re: The Ultimate Guide to Inflation

#21

Post by anm89 »

ubertoop wrote: post #3
crb002 wrote: post #2

M2/Population https://twitter.com/SMT_Solvers/status/1391506520488153091/p... That is an unprecedented hockey stick.

Interesting but, I don't really think I understand what this is. Would you mind explaining it in lay terms?

There is no one definition of "money". M0, M1, M2, M3, MZM are various metrics which have been proposed over time for trying to track the supply of USD all with varying definitions. M2 is frequently used as the simplest and best general case proxy for "how much USD is out in circulation" in a way that tracks credit + currency.

So saying the M2 is high relative to population means that we have been "printing money" (increasing the USD money supply) at a high rate relative to population.

Re: The Ultimate Guide to Inflation

#22

Post by hogFeast »

okoslaatoo wrote: post #7

inflation 150 years is not enough history. inflation is part of game theory.

You should use 150 years across multiple countries i.e. 150 years * N countries.

In-sample annual probability of Weimar is well under 0.5% so it is still a tricky topic to reason about even if you have a bigger sample.

Re: The Ultimate Guide to Inflation

#23

Post by nabla9 »

crb002 wrote: post #20
nabla9 wrote: post #5

Earlier quoted context omitted.

That hockey stick is neutralized by reverse hokey stick. Velocity of M2 Money Stock/Population https://fred.stlouisfed.org/graph/fredgraph.png?g=DPfD

https://fred.stlouisfed.org/graph/?g=DPg0 <-- I added the population velocity.

It should be Velocity of M2 Money Stock/Population

not Population/Velocity of M2 Money Stock like you did.

Re: The Ultimate Guide to Inflation

#24

Post by david-gpu »

okoslaatoo wrote: post #8
treeman79 wrote: post #6

Didn’t see healthcare. My dads carefully planned retirement was ruined because he never imagined how expensive it would get. I pay 1400 a month for a family. Still doesn’t cover a lot.

I upvoted you.

Please be aware of the HN guidelines [0]. For example,

> Please don't comment about the voting on comments. It never does any good, and it makes boring reading.

[0] https://news.ycombinator.com/newsguidelines.html

Re: The Ultimate Guide to Inflation

#25

Post by hogFeast »

nabla9 wrote: post #5
crb002 wrote: post #2

M2/Population https://twitter.com/SMT_Solvers/status/1391506520488153091/p... That is an unprecedented hockey stick.

That hockey stick is neutralized by reverse hokey stick. Velocity of M2 Money Stock/Population https://fred.stlouisfed.org/graph/fredgraph.png?g=DPfD

I have no idea why so many people quote velocity but it is an output, not an input.

Saying that velocity is falling when supply isn't interesting or relevant. The question is whether supply is growing in excess of demand (as ever).

Re: The Ultimate Guide to Inflation

#27

Post by huitzitziltzin »

treeman79 wrote: post #6

Didn’t see healthcare. My dads carefully planned retirement was ruined because he never imagined how expensive it would get. I pay 1400 a month for a family. Still doesn’t cover a lot.

Healthcare is a component of the CPI, outlined here:

https://www.bls.gov/cpi/factsheets/medical-care.htm

Since I am a health economist, I can tell you that it is subject to many of the same problems other goods face: prices increase and this is generally observable (though much harder in healthcare than other areas!), while quality improves all the time but measuring quality is quite hard, perhaps also harder than in other classes of goods.

Re: The Ultimate Guide to Inflation

#28

Post by SigmundA »

lottin wrote: post #18
ubertoop wrote: post #3

Earlier quoted context omitted.

Interesting but, I don't really think I understand what this is. Would you mind explaining it in lay terms?

M2 is a measure of the money supply. There are different measures of the money supply, which roughly speaking are M0 (cash), M1 (M0+current accounts), M2 (M1+savings accounts) and M3 (M2+money market instruments). The fact that they have divided M2 by the population seems a little strange, but basically the graphic shows the amount of "money" (cash+current accounts) per person over a time period in the US.

Per Capita is a pretty common way to normalize a statistic to account for population growth / change right?

Re: The Ultimate Guide to Inflation

#29

Post by silexia »

anm89 wrote: post #16

So awesome to see Lyn Alden at the top of Hacker News. She is an absolute genius! If you aren't familiar with her work and thinking I think a good introduction interview is: https://www.youtube.com/watch?v=f_JmGLMjIOk&t=35s Fun fact: She is an electrical / industrial engineer by trade, not an economist.

I agree. I made a great bet at the beginning of the pandemic, but then the Fed hurt me with it's quick action. I didn't understand macroeconomics, but Lyn Alden has really helped me understand it better with her long form articles.

Re: The Ultimate Guide to Inflation

#30

Post by neffy »

R0b0t1 wrote: post #4
ubertoop wrote: post #3

Earlier quoted context omitted.

Interesting but, I don't really think I understand what this is. Would you mind explaining it in lay terms?

It describes a very sharp increase in created money. The poster of the linked tweet is implying this is unique and we will see negative economic effects (like inflation) because of it. Parent to that tweet is arguing we have not seen those effects despite past federal reserve action and so there is no worry. The wider context to this conversation is that some people [who?] believe federal reserve policy is flawed and…

If the comparison is with 2008, the answer is that the "money" was created on different sides of the balance sheet for different purposes. (We all remember that banks are effectively statistically multiplexing asset cash against liability deposits, nu?)

2008 the Fed printed $2 trillion asset cash(M0) and used it to buy bad debt off the banks books, and put the debt in a runoff fund. No discernible impact on M2. (well, it stopped it imploding).

2020 Fed prints ~$4 trillion of liability deposits, and hands it out to all and sundry to pay their rents, and support the stock market.

M2 goes vertical. Which it has never done for the US in the last 100 odd years. So this time it will actually be different.

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