The measures they're taking, increasing interest rates for a prolonged period of time, are to correct the inflation caused by the expansion in the money supply. They just can't admit it.
See the discontinuity? That's not an artifact of changes to how money supply is measured. It's a real, unprecedented increase in the money supply.
If not inflation, what impact would such an increase have? Is increasing money supply the world's first free lunch? If so, why not accelerate it's growth even more?
The micro view is of course more complex. If you drill down on how extra dollars created by the fractional reserve banking system flow through our economy, you’ll see the money sometimes sits idle in bank reserves without causing immediate inflation, while other times it might flow into investments and pump up the stock market, and then spill over into well-funded startups that bid up engineer salaries and their local real estate market, and so on… The inflation can be uneven and proceed with delays, but the increased money supply does create an overall tidal pressure lifting prices up.
It isn't though is it.
How does $100 in a drawer cause inflation? That is the correct analogy or you wouldn't see the $100 on the balance sheet. It has to be saved to show up. Otherwise it would pass by loan repayment and taxation points and disappear as balance sheets contract.
Inflation is always, everywhere, a lack of supply capacity. Excess capacity to supply is what keeps prices down via market competition.
"You’ll see the money sometimes sits idle in bank reserves without causing immediate inflation"
Bank reserves are assets of banks that sit in Central bank accounts. You or I can't hold them because we can't have central bank accounts. They can only ever be passed to other banks.
Your view of banking is completely wrong. Try this explanation from the Bank of England. https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
If you can see it, it is in a drawer, and therefore not inflationary.
Plus anything you replace it with has the same problem. There is no magic power in interest rates to keep it in the drawer.
There isn't a one-to-one relationship between money and stuff. It's more of an inductive relationship that is more like the power triangle. There is 'reactive money' as there is 'reactive power'.
Bitcoin doesn't have the same problem. Monero doesn't have the same problem. The magic power of interest rates is to hide the theft of inflation by artificially increasing dollar demand from debt holders of the currency. With a hard currency, people tend to take less debt, and less risk with debt. Fortunately they also have less need to borrow because the currency appreciates in value.
If you have any money in your wallet or your bank account at any point in time you are not spending the money that is created as a result of the dynamic ebb and flow of the quantity of money in the system.
The sum total of those people not instantly spending money when they get it is a deficit. It's just the accounting counterparty of people waiting before they spend their money.
But then we're back to the famous Dijkstra quote
"… our intellectual powers are rather gathered to master static relations and that our powers to visualize processes evolving in time are relatively poorly developed. For that reason we should do (as wise programmers aware of our limitations) our utmost best to shorten the conceptual gap between the static program and the dynamic process, to make the correspondence between the program (spread out in text space) and the process (spread out in time) as trivial as possible"
The riff on that would be called "sound money beliefs considered harmful"
Why was the money supply increased?
Probably happening again.
I've always found this insightful.
Do you think the sudden loss of energy, which affects our ability to produce everything, has had a negligible effect on inflation?
If you want to adjust for reality, then find the actual rate of increase for rent and home ownership during the time frame. The US data lags considerably.
I agree that neither are likely to last a decade or anything. But I'm not sure what anything we're doing right now is predicated on the idea that they will last a decade.