And of course, those are just a few factors, there are countless more factors that make the whole situation far more complicated than anyone could possibly account for.
And of course, those are just a few factors, there are countless more factors that make the whole situation far more complicated than anyone could possibly account for.
What's more likely: - Prices went up because there was a short supply of tangible things that actually (somewhat) respect the supply-demand curve
OR - Prices went up because there was an "excess supply" of money from "printing" that arguably does not respect the supply-demand curve
Probably not. Instead, we’d be in a depression amidst mass unemployment and bankruptcies.
Supply chain would have crunched but the demand fueling inflation would have been destroyed. Instead, we maintained both demand and production while the supply chains falter. (For the most part. Egregious stand-outs in destroyed production capacity are the automotive and rental-car industries.)
The government doesn't create money.
Ordinary banks also create money when they make loans, which gets destroyed again when the loans are repaid. More money is created this way when interest rates are lower because people take out more loans then.
So not the government.
> When the Fed "sets interest rates" on bonds
It doesn't set the interest rates on treasury bonds. They set a target and engage in the market to get the price to that level. Still a private entity doing private things. Not the government
> Sometimes literally by physically printing it, but more often by crediting someone's account in their computers
Definitely not!
> More money is created this way when interest rates are lower because people take out more loans then.
This is the only way money is created. The previous paragraph is far from how anything works.
The Federal Reserve is the central bank of the United States. Its board is nominated by the President and confirmed by the Senate. It's the government.
Politicians sometimes like to pretend it's not so they don't get blamed for unpopular choices.
> It doesn't set the interest rates on treasury bonds. They set a target and engage in the market to get the price to that level
That's what setting interest rates means.
> Definitely not!
Where do you think coins and federal reserve notes come from?
If that's your logic, it's very hard to argue with it. It's literally a separate entity even from what you described.
> Where do you think coins and federal reserve notes come from?
the federal reserve which is not the government.
If you think government can print money out of thin air why do they even have to collect taxes. Can they not print their yearly expenditures?
You should think more on this question before you reply with some circular theory
From the fed's own website (notably a .gov domain):
"Some observers mistakenly consider the Federal Reserve to be a private entity because the Reserve Banks are organized similarly to private corporations. For instance, each of the 12 Reserve Banks operates within its own particular geographic area, or District, of the United States, and each is separately incorporated and has its own board of directors. Commercial banks that are members of the Federal Reserve System hold stock in their District's Reserve Bank. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. In fact, the Reserve Banks are required by law to transfer net earnings to the U.S. Treasury, after providing for all necessary expenses of the Reserve Banks, legally required dividend payments, and maintaining a limited balance in a surplus fund."
The Fed doesn't set interest rates on bonds, it sets target interest rates on interbank loans.
Bond rates will naturally tend to be impacted, but they aren't what Fed rate setting applies to.
Not only that: the government cannot and does not create money.
Of course gov printing had an effect, but supply chain is prob the biggest. Do you not agree?
Like Americans couldn’t afford their $25 plastic widgets before, and now because of gubmint stimulus they’re able to finally buy those widgets. Lol.
Cars is a perfect proof of my case. They thought covid would hurt demand for awhile, didn’t book enough chips. And then boom demand spike back and they don’t have a needed input in time. Thus people go to secondary market — used prices up a ton.
Printing money also causes prices to go up, as does war.
Anyone thinking that the problem was that we didn't give people enough money, hasn't taken a look at the explosion in homeless population throughout the country. People are still hurting and it is obscene ti complain that your savings account is worth slightly less when people don't have have a roof over their heads due to the worst pandemic in a century.
https://www.economist.com/graphic-detail/coronavirus-excess-...
This is the government - https://fred.stlouisfed.org/series/GFDEGDQ188S - and for anyone wondering, your party is as bad as the other party
It's not a coincidence, both have been caused by the same pandemic that you might have forgotten about.
To provide a natural experiment that should refute the point you imply: inflation went up massively in nearly every country on earth as they were all hit by the same supply side issues. Only a small minority of these countries "printed a lot of money" let alone as much as the US of A.
If the the extra money can be absorbed (economy can produce enough to meet demand), that’s fine and the economy just grows. But there were supply chain hiccups holding back the production capacity of the economy. So here we are.
Demand was induced with money printing. Supply was restricted with lockdowns. When demand outstrips supply, prices rise.
This cancels out if everybody does it, but not everybody can do it.
The increase in demand from people having more money may also make it economical to increase supply faster and alleviate the shortfall sooner.
b) Deflation is bad but really easy to counteract. Print money and give it to people. Counteracting inflation is more expensive.