Think you understand the link between money supply and inflation? Think again | Hacker News Reader

Think you understand the link between money supply and inflation? Think again

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17 pointsdoener5 comments

Isn't it about the increase in debt? Taking on debt creates money. In the 70's Nixon let loose on the constraints to increased government debt, creating government driven inflation. Workers then had more power to demand higher wages and had low personal debt so could take on a lot more, creating consumer inflation.

Now everyone enters adulthood up to their eyesballs in debt already so they can't take more on. The only way to create more debt to maintain the game is to inflate asset prices so more debt is created for the same assets.

Paul Krugman has been naive and shortsighted over his entire career. It almost seems as if everything he says only takes into account what is right in front of his face and he can't think beyond that. He has already said both the internet and bitcoin are worthless trends. Now he says people that think inflation are coming are a cult?

What is your opinion on the evidence presented in the article?

Mine is that it's a very simplistic analysis, and should just be ignored.

Using the CPI which has been gamed, and changed so many times is the first large flaw. You know how that bag of potato chips stays the same price, but the weight of what you're paying for keeps on lowering? Yeah, that's not inflation per the CPI because it only tracks actual price increases. What about how they switched to substitutes?

The second, is that it completely ignores global trade, and currency valuations.

There's a lot of complex interactions, lag times, and host of other factors that affect pricing at the micro level, and that won't affect all products in the same way.

Inflation happens because we expect it to do. A company says: we expect inflation so we'll raise our prices now to get ahead of things. Competitors see prices go up and they raise their prices. Spiral upwards.

If people don't expect inflation, we don't get inflation.

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