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Comment by mg | Hacker News Reader

You addressed my first point

    Either from a growing economy: Good for the stock market.

By saying the economy might not grow. Fair enough.

But you did not address my second point

    Or from freshly printed money: Also good for the stock market.

Since 2008, the government has reacted to every problem by doubling, tripling, quadrupling the money supply. If we face a recession, won't it do that again? Then, the dollars you get back are worth less than the dollars you lent to the government. And assets that can't be printed - like companies - would go up in dollar value.

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M2 has been in decline this year. There's fewer dollars today than there were last year.

How does this factor into your model? Not only has interest rates spiked to 5%, but dollars are getting erased from existence.

I don't think much can be seen from looking at a single year. The triggers for drastic money supply increases are events like the housing crisis in 2008 and covid in 2020. Events of this size come unexpected once in a decade or so.

Additionally, I prefer to look at M0.

2008 was followed by the lowest inflation in decades. In fact, CPI dropped by -0.4% in 2009 so there was even a full year of deflation. I don't think you're looking at the data of your examples very well. Record amounts of M2 increases in 2008 led to deflation. Care to explain why?

Answer: the economy is bigger than just the money printer. If the overall economy is suffering, then you can still have deflation even if the money printer is going.

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Can you point to a period after 2008 when inflation finally happened? Answer: not until 2020+, after COVID19. Well past the era of your earlier example.

And sure, COVID19 and other issues will not be fully figured out until a decade from now. Your assumptions that money printing causes inflation are very one-sided and ignores greater situations that happen in the economy. There's more to economics than just monetary supply.

The CPI is not a good way to evaluate the value of the dollar. Especially not when discussing if rate hikes impact the stock market.

And again: Look at decades, not at years. Assets are way more expensive these days than they were in 2008. The S&P 500 more than tripled. The Nasdaq 100 increased more than 7-fold.

The economy is like a large swimming pool. If an elephant jumps into one side of the pool (increase of M0), it won't lift the water level on the other side (whatever prices you look at) in a linear way immediately. It will cause complex waves. But when the dust settles, you see higher prices.

Sounds to me that CPI just destroys your argument so you want to discount it and/or ignore it.

Here's another one: 1970s were correlated with growing monetary base (M0, M2, whatever) and incredible amounts of inflation. And yet, the stock market and other assets declined.

These opinions of yours aren't really from economic data or analysis, but instead from vibes from some kind of blogger / website out there. The permabears or whatnot. I've seen opinions like yours all over the internet, but consistently they fall apart when the actual economic data is looked upon, as we are doing here. The only argument is to ignore economic data (like you're attempting to do with CPI).

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