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First, point 2 isn't valid, inflation was happening long before the war.

> yet somehow everyone is experiencing the exact same rates of inflation... almost as if it was for some common material reasons.

Western nations mostly took the same monetary action, likely with some level of coordination so that exchange rates don't wildly change and also because they all had a common problem.

Countries like Japan, Switzerland, China and Taiwan all have much lower inflation than the US, UK, Canada and the Eurozone for example.

https://tradingeconomics.com/country-list/inflation-rate-

> First, point 2 isn't valid, inflation was happening long before the war.

It's the reason that it's at the rate that it is rather than the rate that it was before the war, which is covered by the other two points.

I could be wrong but is China not getting discounted Russian, Iranian and Venezuelan energy right now or do they participate fully in the sanctions? That's a question.

Japan is an odd duck of an economy, I wouldn't use it in such an argument. Switzerland refutes your/their point as a counterexample since they mirrored EU/US policy. I don't know anything about Taiwan's economy. The further up the supply chain and those that can't sustain themselves are going to be the biggest hit though.

> but is China not getting discounted Russian, Iranian and Venezuelan energy right now or do they participate fully in the sanctions? That's a question.

They are but they also had much tighter monetary policy throughout the whole pandemic. Higher interest rates, money supply increase has been constant over the last decade.

Switzerland's money supply increased at a near constant rate the last few decades, there wasn't a massive change during COVID. No they didn't mirror US or EU policy, dunno why you think that. And they've had zero or negative interest rates for the better part of a decade, no change during COVID. Japan same deal.

Check these same indicators for the higher inflation countries and there's clear policy differences...

Late edit - also oil prices are high but not at all-time highs. Last time oil prices were this high the inflation rate wasn't this high. There's other obvious differences.

One thing that is actually obvious in hindsight is that austerity and balanced budgets result in both lower inflation and lower interest rates, that even applies if the interest rate is already at or below zero percent. The inability to conduct austerity and a balanced budget is tied to the inability to cut interest below zero.

We can't have the "nice" things because our money system doesn't support it, we are running an outdated version. So instead we expand the money supply in the hope that inflation results in real negative interest rates.

In my opinion raising interest rates isn't the best answer. If inflation has to be unrolled then according to MMT the government should run a budget surplus and as unintuitive that may sound, it actually requires an interest rate cut while simultaneously reducing the quantity of central bank reserves available to commercial banks i.e. quantitative tightening.

It is almost as if Friedman was right with his monetarism, but he never even once considered that negative interest rates are necessary to maintain a constant velocity of money.

Always remember that quantitative easing is an attempt to emulate negative interest rates with inflation. If you can cut the interest rate you don't need QE.

I think we're at an impasse. There's nothing more to argue without actually quantifying it which is going to be extremely difficult at this point. This [1] cites some beginnings on that front but we'll see what comes of it. The experiment is being done with or without that information though; the central bankers are acting on your story, not mine, so the blood will tell. My bet is that it can't possibly be enough (because the problem is material) and the consequences of the failure to recognize that are going to be very serious.

> Right now, the Fed has no control over the main drivers of rising prices but the Fed can slow demand by getting a lot of people fired and making families poorer.

This is the tip of the iceberg, I say. The global effects will be catastrophic.

Edit: Yep, it's already hitting [2]. And there's your reason for lower inflation in Asia, subsidies and other state spending, so basically the opposite of what you were saying.

1. https://stephaniekelton.substack.com/p/inflation

2. https://www.bloomberg.com/news/newsletters/2022-06-27/asia-s...

Here's how much money (M2) was in the economy in the last 4 decades [1].

In the decade from 2010 to 2020 the money supply increased by 7 trillion (from 8 to 15). It increased by another 7 trillion since (standing now at 22).

Nothing on the supply side comes close to a sudden injection of 7 trillion dollars in the economy.

As for everyone else experiencing inflation, guess what, they blame it on us. Money printed in the US has an inflationary effect in the whole world, not only in the US. Smaller countries cannot simply ring-fence their economy and live in a vacuum. And the EU was not shy about printing money either.

[1] https://fred.stlouisfed.org/series/WM2NS

And now that money printing is being unwound by the central banks. Money is now being take OUT of M2.

> Nothing on the supply side comes close to a sudden injection of 7 trillion dollars in the economy.

I think you should look into commodity prices. I'm surprised at how many people aren't paying attention to the global game on this. We're literally going to starve out other countries by outbidding them. That's what's going on here.

> As for everyone else experiencing inflation, guess what, they blame it on us.

No we don't because we know it's a material problem. That's "common knowledge" in Europe. The story here, and as far as I can see, everywhere is "producer costs."

This. I shut down a side business late last year because steel prices were already up 50% in Europe. Most don't pay attention to commodity prices because they aren't exposed to them.

There's also much willful ignorance and motivated reasoning. I've seen people in the US blame it on Build Back Better spending, seemingly unaware that BBB didn't pass.

Yep, that's it right there and most people don't know how much electricity goes into aluminum either, for example. Or that long term fixed prices contracts rose 30% last week while already on the order of 5 times higher than usual. This speaks to the risk being priced in about the fact that things probably aren't going to get better soon and could get worse.

> I've seen people in the US blame it on Build Back Better spending, seemingly unaware that BBB didn't pass.

Ouch.

> I think you should look into commodity prices. I'm surprised at how many people aren't paying attention to the global game on this.

Let's look then at that.

Russia produces about 4 billion barrels of oil per year. The various sanctions reduced that, but not by much. I've seen estimates of 10% to 20% decline, although I have also seen lower estimates. The war has been going on for about 4 months, so at a very conservative 20% output decline it follows that they produced 270 million barrels less than last year. At $100 a barrel, that's a shock of less than $30 billion on the supply side. It's much less than that though, since other producers have increased their output.

$30 billion shock on the supply side vs $7 trillion on the demand side...

You missed every other commodity, including a giant one, natural gas where electricity prices have double even in the most self-sufficient European countries and we're at the point of needing to bring back coal in Germany. Then there's the grain, knock on effects on steel and aluminum, nickel, the blocked ports, and on and on. It's a disaster.

People like shouting and complaining but they haven't got a clue about how stable this system actually is. As long as your government keeps fiscal spending within the target inflation rate of the central bank there is nothing that can rock the boat.

We've got this inflation bomb and yet the market thinks we are going into a recession soon. One would have expected a renewable and EV boom with the high energy prices and what not but nope.

You’re ignoring asset price inflation. China is not experiencing the same rate of inflation.

Asset price inflation was happening for over a decade, yet never made it's way into the cost of butter, until wages for butterchurners and milkmaids and the price of gas started growing.

Alternately, asset price inflation didn’t matter until it priced everyone out of housing, commercial real estate, retirement, and any other asset accumulation.

This inflation episode coincides with millennials nearing the end of the typical income growth phase of their careers without substantial asset buying power. Eventually people will simply drop out of the race, or demand vastly higher wages to compensate.

> retirement, and any other asset accumulation.

Asset inflation doesn't matter in that, as long as the assets don't later deflate.

> or demand vastly higher wages to compensate.

People can demand all they want, but won't get them until there's a labour shortage. Which is what actually caused wages to grow.

> Asset inflation doesn't matter in that, as long as the assets don't later deflate.

For most productive assets (including housing) there is a a limit to the degree of fractional ownership one can reasonably have. While I could buy into REITs, it only closes my short position on housing to own. It's in my interest to own an appreciating/inflating asset that I'm short on - particularly when I will go bust otherwise. If Rent captures all of my purchasing power, I may no longer be able to reasonably close this short position in a reasonable time frame.

Rents in most of the country didn't inflate like assets, though. (Because the asset growth was mostly funded through magical borrowed money, while rent is paid by real wages received by real people. No wage growth = limited rent growth. Except in places like SF, where it is paid by stock grants, which grow thanks to magical borrowed money.)

> This inflation episode coincides with millennials nearing the end of the typical income growth phase of their careers without substantial asset buying power.

Interesting. Do you have any links that quantify this?

> Eventually people will simply drop out of the race, or demand vastly higher wages to compensate

Maybe in some places. But this doesn't line up with what we know about American nature. Their frustration will most likely be expressed via violent outburst, blaming other groups, believing in conspiracies, and who knows what other exciting new antisocial behaviors they'll cook up on the internet.

MMT is basically a logically mangled variety of FTPL, anyway. Both of them see expectations about the government budget (i.e. future taxes and spending) as the main factor behind inflation.

MMT is an accounting framework.

The tone of your comment is intentionally antagonistic, but I agree with the underlying concept.

I think we can see inflation as a direct result of excess globalism, especially lean supply chains, and changes in underlying customer demand, i.e., the basket of products consumers are wanting was different than pre-pandemic. All of these are supply side problems, but it seems to reason that at least part of the pent up demand is a result of new consumer cash. I'd argue it's a political scapegoat though.

Tone policing is arbitrary and without its own oversight. Defund tone police!

> It sure took a lot to cause a crisis if QE and the pandemic alone weren't enough, we had to add a war and a labor market so tight that it allowed for a renaissance in unions and the Great Resignation.

Um, what? It did start last year. Calling it the "Putin price hike" is pure propaganda.

> Calling it the "Putin price hike" is pure propaganda.

Saying this requires you to have followed absolutely no commodities news. Please, open Bloomberg or something.

You mean like here? https://www.bloomberg.com/quote/BCOMTR:IND

You're right! It started in 2020, not 2021. It only accelerated in 2022 - months before the invasion of Ukraine.