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Comment by krferriter | Hacker News Reader

Prices reflect the maximum businesses think they can charge consumers without excessively reducing the demand, in order to maximize profits. If you give everyone money, they create stronger demand for products, and if the supply of those isn't increased (or even worse, is decreased), businesses can charge higher prices because the market will bear those higher prices because there is sufficiently high demand relative to supply. Inflation happens when businesses broadly raise prices. Broadly giving people more money can contribute to businesses finding that the market will bear higher prices because people now have more money.

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> Inflation happens when businesses broadly raise prices.

Unless you are proposing that every company in the world is secretly conspiring together to raise prices, I assume you agree with me that the actual source of the increase is the huge influx of money supply that governments created and injected into the economy.

Businesses will absolutely adjust their prices to whatever the market will pay. However, they are dependent on (or follow) inflation for the actual pricing numbers.

One of the major US issues was that the vast majority of the $6,100,000,000,000 in funding the last couple years that was added to the money supply was given to the wealthy via ownership in companies. They used it to purchase commodities, houses, stocks, and many other assets causing the producers of those assets to raise prices to adjust for the inflated money supply.

This means we see houses doubling when really, money supply doubled and our purchasing power halved.

> Unless you are proposing that every company in the world is secretly conspiring together to raise prices

Is it really "conspiring" when economists speculate that inflation is coming and businesses fulfill that prophecy to either enrich or insulate themselves? It's not even a stretch, just obvious.

Curious how much inflation would happen if it weren't announced that it's time to do inflation.

You’re falling into the trap they set of confusing monetary inflation with price inflation.

Two different things they try really hard to make sure people can’t tell the difference.

givernment injected money into banks, how does that increase money supply among buyers of potatoes?

it affect prices of assets, houses, but this does not, in any way, affect prices of food. The entire argument is fictitious.

If money is not injected into some static immobile "vault" (the whole point of a bailout or liquidity injection is for it to flow outwards), then it is going to be spent. For example, bailed out companies treat the cash injection similarly to investor cash, to be used. Departments get made, projects get spun up, equipment gets bought. In the case of banks, people get hired, existing employees get raises, liabilities get shored up, and assets get bought, which needed to be bought off of people who owned them or made them. And everyone involved at every point in this chain buys potatoes on the way home.

> If money is not injected into some static immobile "vault"

You mean like crypto or meme stocks?

In a way, yes. People flee into assets and commodities they see as "vaults" when they're uncertain, or that they see as rocket ships when they're greedy; this is why their prices rise. The inflation from the liquidity injections is being contained to those assets. The bursting of the stock and crypto bubbles coincided with the rapid acceleration of inflation as people pulled their money out to both escape the falling knife and spend some of it on what they needed before inflation rose more, a vicious cycle. The effects of those purchases cranked the inflation stove.

The stimulus packages provided for far more than just bank lending. Read some of the bills, there were a lot of projects and spending programs.

Regardless, even it if had only been for banks. Anyone was able to borrow nearly interest free money to turn around and spend.

This means anyone (that was wealthy enough) could take their $100k and borrow an additional $X00k they used to purchase assets. When half the purchasing power of the country does that you suddenly have 2x inflation as there are 2x more purchasers (or 2x more money).

> anyone (that was wealthy enough) could take their $100k and borrow an additional $X00k they used to purchase assets

Do wealthy borrow money to purchase perishable food?

We've been through this, we've printed money in 2008 and food prices did not increase.

You cant blame every economic problem on money supply

Food prices did increase after 2008, but it wasn't overnight because the QE wasn't overnight.

Between 2008 and 2015, the Fed’s balance sheet, its total assets, ballooned from $900 billion to $4.5 trillion. Likewise, food prices also increased.

However, this time we injected over $6 trillion in only a few months. A much faster rate of growth resulting in quickly rising inflation.

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