What happens when you get high inflation and the central bank can't stop money printing because it would cause your sovereign to default, like we saw this week in the UK?
The reason I mention this is that the Euro would experience inflation even if the central bank turned to a policy "money destroying" because the USD is absolutely crushing every currency. Even bastions of stability like the CHF have lost 10% of their value against the dollar. So any produces or services that touch an American company in any capacity are going to see inflation.
The subject is far more complex than money printing...If there was "one weird trick to stop inflation," then we'd never have inflation.
Yes, basic logic. Central banks purchasing assets like index funds, bonds, etc. will naturally cause prices to rise.
I’m not entirely sure how you can steel man an argument that printing trillions of dollars will not lead to higher inflation but I’m happy to hear it.
A bunch of things have changed in the past few years, which could trigger inflation. A massive pandemic that continues to kill millions every month, lock downs in China that curb the ability of the world's largest producer of goods to produce goods, a war in Europe which has caused a massive energy crisis.
So where I'm sitting, basic logic exculpates central banks.
I think this was mistaken. There has been huge inflation over those 13 years, it's just been in specific asset classes like houses rather than general goods.
This other paper has more breakdown. Search for "estimated cumulative excess deaths", 15-25 million through Sept 2022. It's ballpark but it's not insignificant. https://ourworldindata.org/excess-mortality-covid
I'm not a wonk here but have heard the argument that QE from 2012-2019 was partially to keep deflation at bay. Meaning, QE and ZIRP _did_ increase inflation, even if the result was reaching the target 2%.
The scale of increasing money supply and QE also was much larger this time. Before 2009 Fed balance sheet was under $1T. Actions taken during and around the GFC increased it to $2.1T. During the last couple years they grew it by $5T, and it maxed out just under $9T.
https://www.federalreserve.gov/monetarypolicy/bst_recenttren...
I’ve only researched the U.S., but there is a lot of evidence that free money greatly increased demand and lead to inflation. Given that a lot of the world invests money in the U.S., the Fed’s loose money policy likely has knock on effects throughout the world. And then you add on the loose monetary policy of the other central banks…
The story just makes sense. Low interest rates means banks have more money to lend, everyone else gets more money (unfinanced stimulus payments) which means they have more money to spend on this driving prices up.
Its hard to tease out. It's like lung cancer. Before it was directly associated with smoking, the evidence was overwhelming when you consider that nearly every case of lung cancer happened in people who were heavy smokers. Add a mechanism to how inhaling smoke into your lungs can increase the probability of cancer and you have pretty compelling evidence that smoking is the culprit. Others with a stake will try to confuse you (cigarette companies, central banks, etc), but its pretty obvious.
imho, the US fed will fail to knock down inflation much because they can't control these external factors, energy prices increased, supply decreased (in part bc Euro stopped buying Russian petro products), food shortage. These are outside their control. I keep reading articles the last few days saying we are close to a deflationary spiral on prices, going completely the other way. Who knows who is right. But I am right that there are these external factors causing inflation.
Ie supply is down right now
If the European central bank started reducing the supply of Euros, the Euro would increase in value relative to the USD. The rise in the USD isn't an earthquake or weather phenomenon independent of everything else.