> more than 20% of all US dollars that ever existed were created in the last 2 years and there are “no worries”? I’d like to learn more why.

Because they were created to fight deflation (only barely successfully, as a year ago unadjusted inflation was about 0 and within seasonal adjustment it was negative) and if there are signs of sustained rather than transitory inflation, the Fed will suck them right back up.

It’s like people think monetary policy either only happens in the past or only happens in one direction.

You can't take the official inflation numbers at face value. If you look at real inflation it's been closer to 4-5% a year since 2009.

Which means if you had $100,000 in cash under your mattress in 2009, you can now generally buy half as much with it. Less in education, healthcare. More in consumer tech. About half in Big Macs or housing.

Source: https://www.lynalden.com/inflation/

It's too late to edit this now, but broad money supply increased at 5% per year. Official CPI says that broad prices rose by about 2.5% per year on average since 1990, while the source I linked thinks there’s a good case that it’s closer to 3% or more. In other words, prices went up more like 150% (2.5x) rather than 100% (2x) in total during that three decade compounded annual period.

4-5% annualized inflation would be crazy - but some things have gone up more than that. If your a young person starting out in need of an education and a home - you'll see more than 3% inflation for yourself personally.

> If you look at real inflation it's been closer to 4-5% a year since 2009.

No, it has not:

* https://awealthofcommonsense.com/2021/01/inflation-truthers/

Given that GDP growth has averaged 2% per year, if inflation was 4-5% that would mean the US economy was having 2-3% deflation in real terms.

During the economic devastation of 2009 there was negative 0.35% inflation. Can you imagine what kind of economic apocalypse would occur with negative 2%?

What you are saying makes no sense whatsoever.

> Given that GDP growth has averaged 2% per year, if inflation was 4-5% that would mean the US economy was having 2-3% deflation in real terms.

Pedantic, but the that would be “contraction” not “deflation”. (Contraction = declining real output, deflation = declining nominal prices.)

Yes, sorry my memory betrayed me. It's about 3%/year over the last 30 years according to the source. I posted a correction.

> It’s like people think monetary policy either only happens in the past or only happens in one direction.

You can make a very strong argument that monetary policy for the last 20 years has has little effect on CPI and strong effects on asset prices.

> You can make a very strong argument that monetary policy for the last 20 years has has little effect on CPI and strong effects on asset prices.

If you disagree with policymakers about what the likely course of inflation would have been without the policy intervention, maybe, but I've yet to see anyone make the argument for that disagreement, just assert it as if it were an undisputable fact. So, yeah, if you assume the deflation QE was ddsigned to fight would not have happened without QE, then you are forced to conclude that the low with-QE inflation meant QE didn’t cause inflation beyond what would have existed without it. But that’s largely just assuming the conclusion.

Here's what indisputable: If you gift money to bondholders, bond prices will go up. If you gift money to food buyers, the price of food will go up.

Good question!

Because inflation is the sum of money supply + velocity + consumer expectations + goods production + international monetary markets?

Which explains why historical attempts to point to any one and say "Inflation is coming / not coming!" have fared poorly.

Historical: Except in those cases most printed money went to banks, buying their bad loans. Which had already affected house prices by 2008, and only affected asset and commodity prices, which did rise in price since 2008.

This time round you have more and more stimulus going to ordinary people, who will spend it on ordinary goods like food. That will create a different type of inflation.

(I’m not endorsing either type of bailout/stimulus btw)

It's a fair point. But on the other hand, we had substantially depressed demand in a lot of industries for a year+ due to the pandemic.

And while some of that money found alternate outlets (home improvement, streaming services [0]), the uptick in savings indicated a lot of it pooled [1], and the postponed evictions and rent / loan payments resulted in delayed debt obligations (which are difficult to find numbers on, in total?).

So as usual, arrows pointing both ways.

[0] https://www.familyhandyman.com/article/home-improvement-spen...

[1] https://fred.stlouisfed.org/graph/?g=DXqc (2019-2021 savings rate)

Boy would you be surprised to see that food inflation is decelerating and has been since the stimulus started!

https://fred.stlouisfed.org/series/CPIUFDSL

Have you seen the Bloomberg agricultural price index recently?

Do me a favor.

Log into your terminal, type in 'BCOMAGSP Index'. Hit Go. Then hit 'Max.'

Look at the spike in 2010.

Then tell me about the runaway food inflation that happened then.

EDIT: Just to be clear on my point: Yes I agree that people are hedging inflation via commodity futures (like they do after most recessions), but that doesn't mean they're right. In the same way stock prices are often a bad indication of a company's actual value.

Because no one was/is spending: https://fred.stlouisfed.org/series/M2V

I know at least 3 households who spent all their stimulus dollars paying down debt. And those are the only households I know how they spent it, so 100%.

Decreasing debt to income ratio will stimulate demand, but not in a shock like fashion. Most people don't want to jump back into debt again.

People with big medical bills (because of COVID for example), used it to pay off their medical debts.

People with big credit card debt, student loan debt, car loan debt, mortgages, probably used a lot of it to pay that off.

Other than that, people with homes and cars might have deferred repairs and renovations. So some of that is going to where it would have gone anyway. And why price of wood skyrocketed.

I have heard people claim that QE is disinflationary because the dollars are tied up and don't add velocity but I haven't grokked their reasons why.

QE and the repo operations the Fed does are “providing liquidity” to activity that would (presumably) normally happen anyway. I’d assume this would be the reason. You can argue the activity wouldn’t happen if interest rates weren’t kept artificially low.

Another thing is these security purchases are largely insulated from what is used to calculate inflation. These are exchanges between banks and funds and similar.