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Comment by ifwinterco | Hacker News Reader

The federal reserve can just buy the debt from the government using newly created central bank reserves, but this increases the money supply so in the long run it will cause inflation (eventually you end up with Weimar/Zimbabwe style hyperinflation, although that's a long way from where we are now).

Japan has essentially been doing this (the mechanics are a bit more complicated, but the effect is essentially the same), and they've been able to get away with it because inflation has been low for the last three decades due to external factors such as globalisation.

Now inflation is starting to rise even in Japan, so they may have some issues in the not too distant future.

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Money growth and inflation has no direct connection. It can impact it but doesn't have to. In europe the inflation was caused by the supply chain crisis: https://www.ecb.europa.eu/press/key/date/2023/html/ecb.sp230...

Additionally some experts say that the inflation was bigger in Europe because the governments didn't do investments with new debt.

that’s the governments in the EU deflecting blame and not admitting they messed up telling people to stay home, in some countries up to a year, and then paying those people to stay home (literally money printing) that it had no direct influence on inflation or wasa primary driver of it.

I mean you’d have to be completely stupid to believe that what they did had no impact on inflation.

It's definitely controversial and in the short term it's probably dwarfed by other factors (velocity of money and external factors), but it stands to reason that if M1 increases by 300% while population remains roughly static and GDP increases by 50%, in the long run there will be inflation.

If tripling the amount of base money has no effect then logically destroying 70% of the base money would also have no effect, but I never see people advocating that

The original definition of inflation was literally an increase in the money supply. Economists only changed the term to mean an increase in prices when they also latched onto the idea that they can print new money and inject it into the system without consequence.

Why would it matter what the original definition was?

It seems relevant when the GP claim is that money growth and inflation have no connection.

The definition was changed only because economists decided inflating the money supply was a brilliant economic policy and the old definition became inconvenient.

When you realize they changed the definition only for better optics it's easier to question the underlying principles.

> The definition was changed only because economists decided inflating the money supply was a brilliant economic policy and the old definition became inconvenient.

That probably isn't true, both because it isn't that obvious that the economists thought it was a good idea or that they were the ones who changed the definition. "Economists" don't have any power over anything and the consensus position seems to tend towards disagreement with government policy.

Inflation is one of those topics where there seems to be a dearth of actual economic evidence bought to the conversation. The policy justification in the public discourse tends towards just-so stories.

https://www.clevelandfed.org/publications/economic-commentar...

This is a good overview of the history of the term "inflation."

Ideally people would specify which inflation they're referring to, like monetary Inflation or price inflation. Short of that though, until we started moving to full fiat currencies inflation without any qualifier was inflation of the money supply. After the move to fiat they repurposed the braod term to mean price inflation, presumably because monetary inflation isn't meaningful when your system is based entirely on manipulating the money supply.

Because it’s still true that inflation = money creation = making everyone poorer.

It doesn’t necessarily mean making everyone poorer, when population is increasing and there are significant increases in actual economic output.

In fact, in those situations it’s necessary to increase the money supply to avoid deflation and other issues, as the existing folks with money/resources otherwise just have to sit on their hands and squeeze everyone else to get rich.

In an actual growth environment, Printing more money keeps everyone roughly the same level of poor/rich overall.

The issue is when population is decreasing or actual economic output is decreasing, but rather than withdrawing money to compensate, more money is printed to try to keep the graph going up and to the right.

IMO that has been an ever increasing trend since around the 90’s in the US.

That still depends on which inflation your talking about.

Monetary inflation = money creation by definition. Whether that makes everyone poorer depends on other factors though, like how the money enters the money supply and what current market dynamics are.

Price inflation doesn't equal money creation though. Printing money can cause price inflation, but other things can as well. Printing money too slowly relative to the economy could actually not keep up, prices can fall even though the money supply increase. There may be a corner case or two, but I do pretty much agree though that price inflation makes everyone poorer.

> In europe the inflation was caused by the supply chain crisis

Then we'd expect to see deflation when the supply chain crisis is resolved - which seems unlikely but I suppose it cannot yet be ruled out. I doubt anyone will be held accountable if that deflation doesn't materialise though.

It is an interesting question where CPI inflation is supposed to be coming from if not inflation in the money supply.

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