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Comment by Jerrrry | Hacker News Reader

Please explain how literally directly increasing the M1 money supply doesn't cause inflation.

Everyone got money for free. Things that are free, tend to have less value.

Everyone got a relatively small amount of money for free. It was nowhere near the amount that would be necessary to cause this amount of inflation.

Plenty of people got a lot more than the usual stimulus checks. People with multiple kids got quite a bit. I’m a photographer and was able to collect unemployment on weeks I didn’t make enough, or spent enough on expenses to offset my profits.

That means all of my usual expenses during that period were paid for (unless I made nothing or too much that week), plus a lot of weeks it made sense for me to get new equipment.

In many states, people on the low end of the earning scale made more through unemployment than they did working. I have two friends with small businesses that had a hard time getting people to come back to work for that reason.

Now multiply that by every large corporation with their tax cuts since 2017. At least a lot of the money was borrowed at very low interest rates (from ourselves).

The myth is that inflation was caused primarily by this. It wasn't. Inflation is being driven by a combination of factors, the biggest being supply chain and war in Europe.

Not to mention suppliers and retailers increasing profit margins surreptitiously under the guise of "inflation".

That's just how inflation works. The supply side is always trying to charge the highest price they can, when they can do it successfully that means people have more dollars or more demand to throw at those items.

In a non-inflationary period increasing prices will be met with less demand.

Inflation was plenty high before the war: https://www.statista.com/statistics/273418/unadjusted-monthl...

Yes, and the war has exacerbated, hence why I said a combination. The war, the supply chain, increased savings, government payments, corporate attitude. All of them have contributed, the supply chain, the war, and corporate attitude have contributed the most.

Look at the inflation measurements for fuel oil. It swings wildly. In September prices went down. In October prices went up.

If "more money makes each dollar worth less" was the story then we'd see all goods inflate at similar rates. Perhaps it'd be delayed from the money printing but we'd still see this consistency across industries.

But we don't.

08-20 money supply tripled but no inflation.

I'm not sure that provides an invalidation. There was unprecedented asset inflation during that period. Consumer inflation jumped at the same time the market realized that they were no longer making money hand over fist holding assets, no doubt in response to realizing that the only way to make money going forward was to produce something of value and charging accordingly.

You can print money endlessly, stuffing it into people's bank accounts limitlessly, and as long as they don't spend it you won't see inflation. But once they do start to spend it, the capacity to spend is magnified. Stocks, real estate, etc. provided essentially that bank account... until now.

And by “free” we mean “added to the gigantic mountain of debt our children must pay off“

This is not how the national debt works.

You thinking inflated away or a default? Because those who have bought treasury bills are expecting that money in a few years.

THere is nothing that says that we ever have to pay off the debt. Debt can, and has continued to accrue to this nation since its founding. It is middle school thinking that debt incurred today must be "paid by our children". It's just not at all how the national debt works...like at all.

Yes that middle school thinking is called “arithmetic“

So when bond holders come by wanting their money do you not give it to them (defaulting) or do you just issue more (inflating)? Because those are your two options.

Note also that investors eventually get wise to inflation and start putting their money in gold or somesuch.

We issue more bonds. And because we do issue the bonds and don't simply print the money, it is non-inflationary. This is because there is an asset backing the dollars instead of simply paying out the money, ie: the accounting book is balanced, there is an asset and a liability. It's only when you print money and give it away is the money inflationary. This is why we can continue to increase M1 and not see massive inflation. As the overall economy grows, there are more assets available to back the currency.

You should keep your concern trolling about federal debt focused on things that are actually bad and not bail outs for citizens who are constantly getting fucked by the economy.

Pay off to whom?

Various holders of US debt. The federal reserve, foreign holders, mutual funds, banks, local governments.

The government that printed the money was supposed to reduce the money supply, while capturing productivity from more profitable industries, effectively neutering the difference. Turns out it is easier to print money than to burn it.

The Fed is trying to command the economy, but ultimately people must be more productive for a little less. QE easing and asset deflation have some part, but unemployment must increase, or we simply won't have the "strong labor market" that increased productivity requires. We don't have the sentiment or confidence, and that is going to be devastating if not quickly corralled - inflation can lead to hyperinflation exponentially.

Not for the USD - we have control of the world's economy - which is why the MIC complex and foreign policy is actually an investment in the largest scale.

That difference, between productivity gains and captured output, is the price our future generations pay (in inflation) for continuity _now_. But it isn't fair to push such a can down the road. Things need to pop sooner rather than later, and the Fed would like a "soft landing" - no pop, which may not be possible at this point.

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