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Comment by bko | Hacker News Reader

> If those are the principal drivers of inflation, tightening could depress non-energy demand in a way that causes a recession without alleviating inflation

You don't think the inflation has anything to do with printing $14 trillion out of thin air, or increasing the M1 money supply from ~4tn in march 2020 to over $20tn today?

https://www.covidmoneytracker.org/

https://fred.stlouisfed.org/series/M1SL

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The M1 jump is not new money for the most part, it's a reclassification of things that used to be M2 as also being M1 (liquid) https://fredblog.stlouisfed.org/2021/05/savings-are-now-more...

M2 increased in 2020, but not by as much as you're saying https://fred.stlouisfed.org/series/M2SL

Thanks for sharing. I never knew that. The post says savings accounts were moved into M1 because they're pretty liquid now. But what was the real rationale or implications? Odd time to do that move (April 24, 2020)

It was because in April 2020 Regulation D was amended to remove the six-transfer-per-month rule. The idea is that COVID may force people to make withdrawals from savings account more often so banks could allow frequent withdrawals from savings accounts, making them more liquid. It's not a coincidence that after the Fed suspended the rule they reclassified savings account as M1.

https://www.federalreserve.gov/supervisionreg/caletters/calt...

Why not both? Countries that didn't do significant QE are experiencing inflation, which argues that there is a significant supply side issue. Countries that did do significant QE have more inflation, which argues that QE also contributed. It appears that we're getting roughly 4% from each component.

So hopefully the Fed stops raising interest rates when inflation drops to around 4%.

Most economists don't think it's related, or at least a minor cause. Inflation is happening on a global scale right now.

The biggest problem we've had is a breakdown of our supply chain because of the pandemic.

> Inflation is happening on a global scale right now.

All major global economies have been printing money at unprecented rates last couple of years.

Money printing to some degree has gone on everywhere but not at the same magnitude. It should not be surprising that countries have different monetary policy. Mexico for example had very little money printing/stimulus and had 7.68% annualized inflation in April.

The good thing about money printed through QE, is that it can be easily burned through QT. Which is exactly what is being done, now.

No, because they did basically the same thing ~15 years ago without increasing inflation.

Year over year inflation is higher than it’s been in 40 years, and they weren’t printing money then either.

15 years ago was a different animal because the money largely stayed in the banking sector, as excess reserves. This time, a substantial portion of it was deposited directly into consumer's accounts (stimulus checks) - and that money makes it's way into the real economy, pushing prices up.

No! And in fact most economists consider this to be an extremist fringe theory. A quick counterfactual here is, if the US's inflation is caused by its "money printing" (a term that is used quite loosely here, the vast majority of this money never makes it out to the general economy), then how does one explain the inflation experienced in other nations at the same time where no money was printed?

I don't think the stimulus being one of the drivers of inflation is an 'extremist fringe theory' at all. I thought the consensus was it was one of many factors, and the exact contribution of the different factors (stimulus, supply issues, etc) was up for debate.

US inflation is higher than other wealthy nations and the US also did a larger stimulus. So there is evidence that the additional stimulus may have created greater inflation in the US. Scope this paper here: [0]

As far as the consensus for the cause of inflation being unclear among experts, scope this article in left leaning VOX: [1].

[0] https://www.frbsf.org/economic-research/publications/economi...

[1] https://www.vox.com/23036340/biden-american-rescue-plan-infl...

Stimulus checks certainly had an impact on inflation! (A point I argue specifically elsewhere in this thread.)

But not the QE/printing money.

The UK didn't provide stimulus checks yet is experiencing higher inflation than the US.

Canada gave a lot more in stimulus checks (with respect to GDP) than the US but is experiencing less inflation than the US.

> The UK government has borrowed vast sums of money to fund over £400 billion ($558 billion) in stimulus during the crisis. Total government debt has soared to £2 trillion ($2.8 trillion), or close to 100% of GDP, a level not seen since the 1960s, according to the Office for National Statistics.

https://www.cnn.com/2021/03/03/economy/budget-2021-uk-stimul...

I am seeing other's claim it is the fractional reserve lending and commercial credit.

One other person I saw mentioned that the reserve requirement was lowered to zero in 2020. I don't think that has ever been done before.

Nope. I buy manufactured goods for a couple of businesses and everyone blames the price increases on supply issues.

Also, Google MMT. Printing money is only inflationary of the economy is running near capacity.

MMT is far from fact, and I would go as far to say this little issue we're having disproves a good portion of it.

Which portion?

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