No, that's a facile understanding of how the economy and fiscal policy works. A large portion of inflation is still likely to be due to complex supply issues rather than simply everyone getting some extra cash. There is also the fact that spending on services has shifted to goods and hasn't fully shifted back. It is likely once supply chains finally catch up and spending shifts back to services and travel that much of the upward price pressure will be relieved.

And of course, those are just a few factors, there are countless more factors that make the whole situation far more complicated than anyone could possibly account for.

It's quite a coincidence that the numerous complicated factors all started causing inflation at about the same time as the government printing tons of additional money. Also a coincidence that the confluence of the ineffable complex factors had the same effect that a naive person would imagine printing a lot of money would have.

You seem to imply that the supply chain issue and the resultant inflation would not have happened had your government not borrowed so much?

What's more likely: - Prices went up because there was a short supply of tangible things that actually (somewhat) respect the supply-demand curve

OR - Prices went up because there was an "excess supply" of money from "printing" that arguably does not respect the supply-demand curve

> the supply chain issue and the resultant inflation would not have happened had your government not borrowed so much?

Probably not. Instead, we’d be in a depression amidst mass unemployment and bankruptcies.

So this supply chain crunch would have still happened but people would not have noticed it while dealing with much bigger problems such as unemployment.

> this supply chain crunch would have still happened but people would not have noticed it while dealing with much bigger problems such as unemployment

Supply chain would have crunched but the demand fueling inflation would have been destroyed. Instead, we maintained both demand and production while the supply chains falter. (For the most part. Egregious stand-outs in destroyed production capacity are the automotive and rental-car industries.)

Are you implying that more money does not increase demand?

Yes. It doesn't.

Not only that: the government cannot and does not create money.

Printing does respect the supply-demand curve in nominal dollars. It increases demand in nominal dollars.

Anybody making this claim should also explain how the government goes about "printing" money

The government doesn't create money.

How do you mean the government doesn't create money? The Federal Reserve Bank creates money. Sometimes literally by physically printing it, but more often by crediting someone's account in their computers. When the Fed "sets interest rates" on bonds, it buys bonds on the market using computer money it credits the seller's account with which it created out of nothing.

Ordinary banks also create money when they make loans, which gets destroyed again when the loans are repaid. More money is created this way when interest rates are lower because people take out more loans then.

> The Federal Reserve Bank creates money

So not the government.

> When the Fed "sets interest rates" on bonds

It doesn't set the interest rates on treasury bonds. They set a target and engage in the market to get the price to that level. Still a private entity doing private things. Not the government

> Sometimes literally by physically printing it, but more often by crediting someone's account in their computers

Definitely not!

> More money is created this way when interest rates are lower because people take out more loans then.

This is the only way money is created. The previous paragraph is far from how anything works.

> So not the government.

The Federal Reserve is the central bank of the United States. Its board is nominated by the President and confirmed by the Senate. It's the government.

Politicians sometimes like to pretend it's not so they don't get blamed for unpopular choices.

> It doesn't set the interest rates on treasury bonds. They set a target and engage in the market to get the price to that level

That's what setting interest rates means.

> Definitely not!

Where do you think coins and federal reserve notes come from?

> It's the government.

If that's your logic, it's very hard to argue with it. It's literally a separate entity even from what you described.

> Where do you think coins and federal reserve notes come from?

the federal reserve which is not the government.

If you think government can print money out of thin air why do they even have to collect taxes. Can they not print their yearly expenditures?

You should think more on this question before you reply with some circular theory

The fed is organized a bit differently than other government organizations, though similarly to how the US Postal Service is organized. But those are mostly to give it some semblance of independence from the winds of politics. But it is very much under the control of the US Government about as much as the US Military is under the control of the US Government.

From the fed's own website (notably a .gov domain):

"Some observers mistakenly consider the Federal Reserve to be a private entity because the Reserve Banks are organized similarly to private corporations. For instance, each of the 12 Reserve Banks operates within its own particular geographic area, or District, of the United States, and each is separately incorporated and has its own board of directors. Commercial banks that are members of the Federal Reserve System hold stock in their District's Reserve Bank. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. In fact, the Reserve Banks are required by law to transfer net earnings to the U.S. Treasury, after providing for all necessary expenses of the Reserve Banks, legally required dividend payments, and maintaining a limited balance in a surplus fund."

https://www.federalreserve.gov/faqs/about_14986.htm

> When the Fed "sets interest rates" on bonds

The Fed doesn't set interest rates on bonds, it sets target interest rates on interbank loans.

Bond rates will naturally tend to be impacted, but they aren't what Fed rate setting applies to.

You're right, that was an oversimplification, I should've been more clear.

It seems to me I've seen comments here complaining about "the government printing tons of additional money" for at least the last decade.

This is somewhat misleading - the definition of M1 was changed in May 2020, so numbers before and after are not directly comparable. See https://fredblog.stlouisfed.org/2021/05/savings-are-now-more.... It’s best to link directly to the page which is interactive and describes the actual components of M1 instead of just the image https://fred.stlouisfed.org/series/M1SL

Also that is the fed and M1 doesnt really have anything to do with money printing anyway - fed balance sheet is where it is at https://tradingeconomics.com/united-states/central-bank-bala...

This is the government - https://fred.stlouisfed.org/series/GFDEGDQ188S - and for anyone wondering, your party is as bad as the other party

I don't think the best climbers in the world can scale that cliff.

> It's quite a coincidence that the numerous complicated factors all started causing inflation at about the same time as the government printing tons of additional money

It's not a coincidence, both have been caused by the same pandemic that you might have forgotten about.

To provide a natural experiment that should refute the point you imply: inflation went up massively in nearly every country on earth as they were all hit by the same supply side issues. Only a small minority of these countries "printed a lot of money" let alone as much as the US of A.

It's naive to pretend that when supply goes down and demand goes up, prices don't go up as a direct result.

Printing money also causes prices to go up, as does war.

Anyone thinking that the problem was that we didn't give people enough money, hasn't taken a look at the explosion in homeless population throughout the country. People are still hurting and it is obscene ti complain that your savings account is worth slightly less when people don't have have a roof over their heads due to the worst pandemic in a century.

1982—present is within the last century and has had a death toll of 36.3 million so far. I think your position could improve from some grounding and perspective.

(You seem to be referencing the AIDS pandemic.) In terms of deaths per year, that's far smaller than COVID-19, whose death toll over two years probably lies somewhere between the 6 million official number and the over 20 million "excess deaths" counted by The Economist.

https://www.economist.com/graphic-detail/coronavirus-excess-...

You'd possibly have a point if we were discussing long term medical research h funding priorities. We aren't. We are discussing acute economic phenomena. It that context, covid it absolutely the worst pandemic in a century.

*had the worst government economic response to a pandemic in a century

That's a meaningless distinction since there isn't any comparable event to compare the response to.

How is it ineffable when he just described one?

Of course gov printing had an effect, but supply chain is prob the biggest. Do you not agree?

Supply chain crisis is to some degree a symptom of the monetary expansion

I wonder if massive piles of free money could have had something to do with people demanding more supplies from the chain.

Yeah definitely not a huge demand drop, followed by a normalization/huge increase of demand - bottlenecking most of the supply chain and causing those willing to pay more to get delivery priority.

Like Americans couldn’t afford their $25 plastic widgets before, and now because of gubmint stimulus they’re able to finally buy those widgets. Lol.

Cars is a perfect proof of my case. They thought covid would hurt demand for awhile, didn’t book enough chips. And then boom demand spike back and they don’t have a needed input in time. Thus people go to secondary market — used prices up a ton.

it's almost like "complex reasons" is simply obscurantism.

The handing out money to consumers doesn’t help.

If the the extra money can be absorbed (economy can produce enough to meet demand), that’s fine and the economy just grows. But there were supply chain hiccups holding back the production capacity of the economy. So here we are.

That's ignoring the global nature of the supply chain. If supply is constrained and you give money to your own people, they may bid up prices some, but not by the entire amount because mostly what they're doing is using the money to outbid people in other countries. Which also means your people get more of the stuff.

This cancels out if everybody does it, but not everybody can do it.

The increase in demand from people having more money may also make it economical to increase supply faster and alleviate the shortfall sooner.

Exactly right.

Demand was induced with money printing. Supply was restricted with lockdowns. When demand outstrips supply, prices rise.

More money supply likely accounts for some increase in demand. But the lockdowns themselves likely had more effect on demand than more cash. People need or want more things when they travel less and have fewer services to consume. When behavior changes in large ways, demand shifts to different things. Printing more cash didn't drive demand for n95 masks. It also didn't drive demand for things like flour and many other commodities. With the exception of those in extreme poverty, most people didn't run out and buy more toilet paper and flour because they got a stimulus check.

The pundits claiming that "it's complex" are the same ones that claimed inflation didn't exist until it was undeniable.

If these other factors cause inflation, then they would cause deflation, too. Why does deflation not happen?

a) It's easier to reduce supply on short notice than increase it. Nobody wants to sell below cost.

b) Deflation is bad but really easy to counteract. Print money and give it to people. Counteracting inflation is more expensive.

Deflation is exactly what would have happened had the fed not stepped in with their money printing. It's just that they printed way too much and did it very inefficiently, with a lot going to scammers.

The Fed's target in 2019 was 2%. 7% is high, but if it weren't for Russia and decreased in 2022, I'd argue they did a decent job. They had no idea how big of a hole lockdowns left and the price increases from supply chain issues would cause. They overshot their target, but they also wanted to overshoot rather than undershoot.

Congress and public policy is where the ball was dropped. Most of the Europe did a better job maintaining work stability by distributing subsidies through employers rather than cash to individuals. It meant that when lockdowns eased, workers were ready.

> The Fed's target in 2019 was 2%. 7% is high, but if it weren't for Russia and decreased in 2022, I'd argue they did a decent job.

This is “broken clock” logic. The only argument behind giving the Fed credit for the 7% rise in prices is “they’ve been trying really hard to do so”.

Yes he is. We’ve been printing absurd amounts of money for years praying inflation didn’t show up in meaningful indicators and now that it shows up it’s some big surprise. We should have been raising rates the last 8 years or so instead of juicing the economy and stock market nonstop.

If you print a trillion and give it only to me, there is no much inflation because what could I possibly buy much more than I do? Not bread or gas. It will go in financial products and market indexes will grow.

If you give $1000 to 1 M people then you start having inflation because those money go into shops.

This is the lesson from the last 15 years.

> We’ve been printing absurd amounts of money for years praying inflation didn’t show up in meaningful indicators and now that it shows up it’s some big surprise

They have been praying for inflation - it is the intended outcome of the policy and it has taken 23 years for it to happen.

What they wanted was inflation in wages, assets, goods, services, productivity and growth. Inflate away the notional value of debt. What they got was gamestonk, crypto, stagnant wages, gig economy and antiwork.

The Fed can't monetize the debt unless there is debt to monetize. The checks all came from Congress.

But there was simultaneous easy money policy for years, in contradiction to the Taylor Rule. This deviation from that rule was going on for years before Powell, but he continued it for years, all throughout a prolonged economic boom.

Instead of counter-cyclical policy, this is pro-cyclical policy. And resulted in the misallocation you noted, for which Congress is even more to blame.

During the monetary expansion post-2008, I recall listening to a number of experts basically predict exactly what's happening today - "the problem with expanding the money supply is that by the time you realize you need to pull back, it's too late and there will be a ton of political pressure to wait just a bit longer".

Inflation has been rampant for years, it's been hidden as inflation measures inexplicably don't include cost of housing, it also doesn't include the massive subsidies provided to industries that are poorly managed like US agriculture. Finally, the claims that massive price increases were due to inflation would be much more believable if the businesses selling the "inflation impacted goods" we're making the highest profits ever, far in excess of the highest estimates of inflation.

Your claim also doesn't explain how inflation didn't balloon in countries that provided actual financial support to people - the US had two payments of next to nothing, most other countries provided continuous support, even those with far less per-capita income.

>Finally, the claims that massive price increases were due to inflation

You have this backwards. Inflation (via CPI) is based on price changes, it doesn't cause them.

>would be much more believable if the businesses selling the "inflation impacted goods" we're making the highest profits ever, far in excess of the highest estimates of inflation.

This is exactly what you'd expect when there is low supply and high demand.

Inflation is the decline in value of the currency. CPI is how we normally attempt to measure inflation since asking "How much will you pay for a dollar today?" will not yield a useful answer. You are right that the measuring is done in hindsight. But the decline in value of the currency is responsible for prices rising to compensate.

The value of a currency can decrease compared to other currencies but prices can stay the same inside a country. What happens is that you have less of everything especially for goods that depend on trade with other countries.

I am referring to the value of the currency compared to itself in the past. A dollar today is not worth the same amount as a dollar yesterday. Inflation is that decline in value over time. Less commonly, it is also possible for a currency to become worth more over time, which is what we refer to as deflation.

If, for argument's sake, a dollar halved in value, the price of a widget of constant value would double to maintain equality in the exchange. What makes things complicated is that the value of the widget isn't constant and can also change over time, so we can't just look at that widget to see how the value of the currency is changing. Instead, we try to look for price trends across a wide range of products (CPI) to try and infer what is related to currency devaluation rather than changing values of other goods and services.

Are there no measures that bake in home prices?

Not sure what GP is talking about.

Housing is the biggest component in CPI: something like 40% IIRC

It's an indirect measure at best and highly gameable [0]

[0] https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...

There is definitely something wrong with CPI. I'm not sure what it is because on paper it seems like a reasonable measure, but anecdotally my expenses are up more like 17% vs CPI's 7%. My "personal inflation" regularly beats out CPI (although usually not by such a high margin. Housing, fuel, and food have been the biggest increases for me. I wonder if all the consumer goods are somehow over represented.

There is definitely something wrong with reports of gas prices being too high. I barely drive anywhere so the increase in price barely effects me.

It's a common misconception that gas prices barely effect those who don't drive. Unfortunately it couldn't be further from the truth. A massive portion of the logistics of America, bringing essentials that almost everyone consumes like food, healthcare goods, building materials for maintaining housing, etc are reliant upon vehicles that consume petroleum products to reach the consumer.

I don't think so, but I could be wrong. While gas does play a role in the price in a lot of different things like you state, the percentage of the final price of that item that includes fuel is usually very, very small.

Some back of the envelope estimates:

The last mile is usually going to be the largest expenditure of fuel per dollar of product transported. A semi truck gets 5 mpg on the low end and with diesel fuel currently at $5/gallon, that means it would cost just $2,700 in fuel to ship an entire truck load from New York to Los Angeles (much farther than most products would ever be trucked). Assume the truck is loaded with a low price, low margin product like toilet paper and you might ship around 4,000 small packs of toilet paper for a total fuel cost of $0.67 per roll. So if fuel prices doubled to $10 gallon, you would be looking at an increased cost of $0.67 per pack of toilet paper that is normally, maybe $10. So you are looking at a 7-10% increase in the cost of that toilet paper due to a doubling of fuel prices.

Of course, fuel is needed for the equipment that cuts the trees and the energy to manufacture that toilet paper, the plastic it is wrapped in, etc. But, we have to remember that we are talking about an inexpensive yet bulky product that we are shipping across the entire US and the weight is low so you could probably drag two trailers of it with only a marginal decrease in fuel efficiency.

The reality is that most products are trucked much shorter distances from ports that use enormous container ships where the fuel cost per dollar shipped is vanishingly small.

> My "personal inflation" regularly beats out CPI

I've experienced the opposite several times because I don't consume a few things that are part of the basket.

If they manage to get it back under control now, then we'll know if they could have gotten it under control post-pandemic. If not, we're all fucked anyway and not many people may care to research the answer to the question.

This is why the timing of the invasion is, for want of a better word, "perfect" if you're someone who wants to watch the world burn (assuming that "the world" was primarily the Western World with its heaviest dependence upon "stuff").

As the pandemic appears to be easing, the interest rate hike (first step as a reaction to the inflation problem) a month away. The timing of the invasion was both exquisite and horrendous.

Inflation was long before Putin.

Also worth noting that no one expected the US to impose sanctions of this severity. Even a month ago, President Biden himself would not have thought we would react this way. But Twitter hysteria struck again and imposing harsher and harsher sanctions—and in the private sector, voluntarily withdrawing from the Russian economy even when sanctions did not require it—became a way to demonstrate your holiness. Rational calculation and self-preservation, out the window. We live in a Twitter world order now.

You can tell this was unplanned because back in January, with the invasion looming, US officials said (even if they did not completely mean it) that sanctions would be narrowly targeted to hurt the Russian elite but not the common people. Now, the explicit goal of the sanctions is to cripple the Russian economy and cause mass suffering sufficient to collapse support for the Russian government. If this was the plan all along, we would have said so. Deterrence only works if the other guy sees it coming.

What did you expect the west to do in this situation? Let Putin get on with it unscathed? This is the rational alternative to World War III.

The announced US policy was yes, to let Russia as a whole mostly get away with it, but to hit the Russian elite specifically with very harsh but specifically targeted sanctions. The red line was NATO territory + de facto NATO members like Finland, not Ukraine.