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Comment by whatever1 | Hacker News Reader

We cannot make sense of it because we try to assess a global problem with American data.

It would be an easily explainable problem if the US and only the US printed a ton of money and got overheated market.

The problem is that virtually every country printed a ton of money during the pandemic. So the demand overheated globally.

On the supply side we have:

a) Chinese factories working intermittently due to COVID restrictions

b) Russia who cannot participate freely in the gas market anymore and their threat to cutoff Europe during winter

c) The supply chains are experiencing full scale bullwhip effects working overtime to satisfy demand that is not there anymore.

These incur huge import costs to any country.

So even if the US had printed zero additional dollars the past two years, we would still be experiencing inflation due to the vast raises of the cost of our imports.

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Supply issues can be alleviated with less demand, which is precisely what the fed attempts by raising interest rates. So your logic about not printing dollars not having an effect isn’t spot on imo. You also ignore the fact that USD is the reserve currency making it difficult to compare to other countries.

The demand curve hasn’t changed

That's kind of the point. We haven't seen demand drop yet which is further driving inflation.

That’s good though. We generally want demand to stay strong. Inflation sucks but if it’s just prices going up because supply went down, well that’s just the breaks.

Demand should fall. Because of the [1]bullwhip effect.

- Someone wants a car and ask the car dealer

- car dealer orders 3 just in case because shortage

- distributor orders 6 for the same reason

- factory makes 12 because parts are short in stock

Result: cars in demand 1, cars in stock 12. No more just in time production and huge demand imbalance.

[1]https://web.archive.org/web/20220627205956/https://www.washi...

In your example, demand doesn’t decrease, it stays stable while supply increases.

If anything you don’t want demand destruction if we are anticipating such a drastic increase in supply.

right, it is relative in a way too right? because for the factory and parts suppliers the demand is what comes down the supply chain... So one day they will be producing and getting parts for 10 cars and the next time nothing at all. So the part suppliers will see the demand of its production to fall, even though there might still be 1 person buying one car.

It's good news if demand stays strong at a certain price point. If we are in a highly inflation environment and demand does not drop however that is not so good.

Inflation metrics don’t care about demand levels.

It’s just a basket of goods.

The question of how many people can afford this basket is a different question.

> question of how many people can afford this basket is a different question

And that question’s name is demand.

Let’s assume that we over reaching 10% of the global oil market, meaning that due to high demand we extended the supply by adding 10% expensive sources of oil.

To get the prices back to the original we need to bring down by 10% the *global* demand.

That means that the US needs to cut 50% their oil consumption (demand) if they are to act alone.

These are not realistic things.

By increasing rates on USD you can affect demand globally. We are not in isolation as you seem to be so convinced. Also I have no idea why you'd compare global supply to domestic demand. Again, reserve currency and petrodollar status.

> By increasing rates on USD you can affect demand globally.

That's like saying that by pointing my fan to blow onto the road, I can move the cars.

In theory and all else being equal, yes. In practice, cars have drivers that steer to stay on the road.

Similarly, other countries around the globe have their own central banks that regulate their local money supply to achieve their own goals.

Japan doesn't have high inflation.

neither does China, the second largest economy

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