[rank0]

There's actually considerable debate on the subject. I find it reasonable that things which are outside the CPI basket can indeed experience inflation.

https://www.investopedia.com/articles/07/consumerpriceindex....

If 25% of circulating USD were created last year, and our economic value is the same or even diminished, wouldn't it follow that there must be significant inflation?

[arcticbull]

> If 25% of circulating USD were created last year, and our economic value is the same or even diminished, wouldn't it follow that there must be significant inflation?

Not necessarily, no. The value of money is a function of supply and velocity. If the velocity went down and the supply went up 25% the fed can still nail its 2% target. [1, 2, 3] If the velocity increases next year the fed can shrink the supply commensurately to maintain its targets.

[1] https://www.investopedia.com/terms/v/velocity.asp

[2] https://www.stlouisfed.org/on-the-economy/2014/september/wha...

[3] https://www.investopedia.com/ask/answers/042015/how-does-mon...

[rank0]

That's very interesting I was not familiar with the concept of velocity.

It still seems to me that velocity can vary depending on the underlying entity. So unless every asset has the same velocity measure as the items in the CPI basket, it seems that there has to be some amount of inflation somewhere like possibly US equities.

[arcticbull]

The idea of velocity is pretty simple. If you print a $1T coin and hand it to me, then I throw it in a safe and forget the code, did the increase in supply cause any material increase in inflation experienced at the point of sale by the average person? Probably not. The supply went up, but the average velocity went down commensurately.

How this interacts with assets is in my opinion not super clear. Pricing of assets is supply and demand, unlike the CPI basket. The CPI basket is based on human need. There's no human need for AAPL shares. However, there's a ton of stimulus money, and folks who remember 2008's V-shaped recovery, and a bunch of people stuck at home day trading. I think that's much more likely to be driving asset prices than supply. After all supply is enacted by changing lending parameters.

To the extent asset prices don't put pressure on CPI, they reflect an increase in welfare, not an increase in inflation.

[imtringued]

The velocity of a particular Bitcoin arrives at 0 given enough time. Bitcoin get lost. These Bitcoin cannot move and thus contribute to the deflation of Bitcoin. They effectively shrink the money supply.

[arcticbull]

True, but that's a uniquely Bitcoin problem, and it's one of the many reasons Bitcoin is not fit for purpose.