Hacker News Reader

Comment by lowkey | Hacker News Reader

You are confusing cause and effect. Prices go up over time as measured in fiat because of monetary inflation (i.e. money printing) by the Fed which dilutes the purchasing power of the dollar. M2 monetary supply inflation coupled with the velocity of money causes CPI to increase, not the other way around.

70% of all the dollars ever created were created since the invention of Bitcoin. Please substantiate your claim that Austrian economics has been debunked (in favor of modern monetary theory I suppose?) From my perspective, Austrian economics is proving itself more and more each day.

I would love to hear your explanation of how a nation can inflate it’s money supply by 40% in a year without affecting inflation.

View on HN

Not that it is definitive proof, but these same alarm bells were going off when we drastically increased the money supply to combat the financial crisis in 2008. And inflation never happened.

The reason we aren't, at least for now, likely to see serious inflation due to the recent increase in money supply is because most of it entered the economy through the Fed's bond buying program. So the bonds went on the Fed's balance sheet and most of the money used to purchase those bonds went back on deposit with the fed.

Those bonds will either reach maturity or the fed will sell them - at which point the fed can erase that from the money supply.

But, as the other poster said, the simplified version is that money supply doesn't matter if it's not actually in circulation and being used.

> The reason we aren't, at least for now, likely to see serious inflation due to the recent increase in money supply is because most of it entered the economy through the Fed's bond buying program.

In what fairy-tale world do you live in where we are not experiencing inflation? Seriously, do I actually need to justify the fact that we are experiencing inflation as a result of money printing in a world where Biden just explained that his $3.5 Trillion dollar stimulus bill is actually going to be FREE since $3.5 Trillion = $0 in politician math?

I highly doubt that 100% of the significant increase in prices over the past year was due to supply chain issues and 0% can be attributed to the exponential increase in money supply.

Also, to the sister comment arguing that it’s all due to an increase in the size of the population, has the population increase 40% in the past year? As we begin to open up the economy the velocity of money is increasing and inflation is the natural result.

It's not that complicated. If money supply is causing the price inflation, then we should be seeing higher than usual demand. For most things, that doesn't appear to be the case. Demand may be slightly up, but supply constraints are the real issues. No one said 0% was attributable to money supply. But it is likely a small factor since, as I explained, most of that money is not even circulating.

GP wasn’t stating that a larger stock of cash is definitively not a parameter of inflation, but that it is not the only parameter.

As to your question about the other factors, here’s a thought experiment: if I printed cash daily but locked it up in a chest and sunk it to the bottom of the sea, will there be inflation? Going one step further: does inflation depend on the distribution of liquidity in the economy?

> As to your question about the other factors, here’s a thought experiment: if I printed cash daily but locked it up in a chest and sunk it to the bottom of the sea, will there be inflation? Going one step further: does inflation depend on the distribution of liquidity in the economy?

In your thought experiment No it would not impact inflation, but in the real world over the past year we have begun to see rates of inflation not seen in 40 years. Inflation is running at 3x the Fed’s target at a time when the Fed’s money printer is creating trillions of US dollars out of thin air.

In September 2021, anyone diminishing or dismissing the impact of money printing on inflation is being willfully ignorant or intentionally disingenuous.

This. Plus also, lets for a moment remind ourselves how reliable of a measure of inflation CPI is. Its basis is a basket of products the composition of which is opaquely tweaked to suit an particular agenda.

This makes it _less_ reliable than M1-M4 as a measure of inflation.

Reply on news.ycombinator.com