[bildung]

Honestly, don't get your economic advice from youtube. Almost any introductory econ textbook will be more educative. Almost zero actual economists think inflation is coming to the US. It's only the (conservative) pundits that produce these unfounded fears. Expanding the money in circulation alone is not enough to trigger inflation (see 2008+).

[imtringued]

To be more precise, there will be a short term spike in inflation in 2021 and 2022, it will be short term precisely because the source of the excessive demand will also result in more supply over the long term and therefore prices will fall over the long term again averaging to less than 2% inflation. If the inflation rate ends up staying up over the long term then the Fed gets to play the hero, which is something it was waiting for since 2008 and perhaps since the dotcom bubble.

[pattusk]

Expanding the money in circulation may not increase the inflation rate, but I would believe that it does trigger inflation in other asset classes such as stocks and real estate.

I'd be happy to be disproven with data, but my anecdotal experience since 2008 is that while my purchasing power hasn't budged much (for things like electronics, travel, food...), my ability to purchase a house from my wages has decreased and will only continue to do so (despite my wage nominally increasing during that time period).

[md_]

CPI includes housing, though.

Obviously it's fair to say that inflation may be measured more in some prices than others, but you're sort of muddying the waters by referring to housing as both an asset class and a cost-of-living, right?

Perversely, if inflation primarily affects "assets" (i.e. of the investment/speculation type), the premise of the original question here is sort of flawed: if increasing the money supply increases the price of assets, those with savings get richer—exactly the opposite of the ordinary understanding of "inflation!"

[imtringued]

When you buy stocks there is someone on the other side selling stocks, the question is, if that person has fiat now, why isn't he spending it? If he isn't spending it (as can be seen with low inflation), why would he sell the stock in the first place? Since companies' credit rating rises with the value of their stock, they can afford to borrow more and grow their company. Why isn't this happening? Why is Apple sitting on USD abroad and borrowing domestically? Figuratively speaking: Why is the seller of the stock happy with lending to the company whose stock he sold? By putting his money in his bank account he increases his savings which get handed to corporations through borrowing. Or rather, he escapes from negative interest rates by buying government bonds.

None of this makes sense. What is happening with all the new money that is entering the economy? Is there really someone with a Scrooge McDuck vault out there? Of course, if inflation picks up that vault has no reason to exist anymore and the stimulus checks raised inflation as intended.

[md_]

Increasing money supply without a commensurate increase in CPI is consistent with a rise in asset prices, especially speculative assets.

(Maybe this is what you're saying as well?)

If the Fed prints $1,200 for every adult making less than whatever it was, and prices of everyday goods and services don't go up, and instead those adults all turn around and spend their $1,200 on Gamestop and NFTs...

...it all kinda makes sense.

https://nymag.com/intelligencer/2021/04/nft-future-of-money....

Perhaps more explicitly: purely quantitative attempts to understand the economy (as with monetarist explanations) fail to account for the social component. Maybe people are bored 'cause of the pandemic, and as a result, they spent more of that $1,200 on gambling as a form of entertainment, instead of on restaurants or new clothing.

Animal spirits.

[bildung]

> asset classes such as stocks and real estate.

Which is not inflation, but asset appreciation (i.e. the goal of investment). Inflation measures the price level of consumables. Stock and real estate is not consumed.

[tom_mellior]

One person's "asset appreciation" on real estate is another person's inflation of housing costs.

[bildung]

Housing is part of the CPI https://www.bls.gov/cpi/factsheets/

[tom_mellior]

Yes. That was my point: House owners' assets "appreciate" by inflating non-owners' prices.

[feyndev]

What about Michael Burry ?

[bildung]

I assume you mean his liking to the Weimar Republic hyperinflation on Twitter? IMO it doesn't make sense, as the situation is completely different.

Germany lost the first world war and had very high and quite sudden war debts plus suddenly had to pay reparations amounting to about 25% of GDP, denominated in foreign currency - this is important. Germany then printed money (this is similar to today) and bought foreign currency in the FX markets, at essentially any price available (this is not). The money flowed to the war winners, out of the domestic economy. This caused instant and quite strong devaluation of the German currency.

What the US does: It invests a comparatively tiny amount of money (~$2 trillion, <4% of GDP) into the local economy, where it will cause actual economic action (people buying things and services), to make up for lack of demand caused by Covid. FX markets are not touched. AFAIK it is aiming to finance at least a part of this through taxation.

[imtringued]

When the government spends money like that, the hope is that it nets a return in the future and if you can find such an investment, then you can borrow an infinite amount of money, until everyone is employed, after that the cost of labor will go up and it no longer becomes possible to net a higher return with new investments.

If there are ways to increase the competitiveness of your economy and you successfully execute your investments this can only be a blessing. I mean think about it, you get to build the most advanced infrastructure for free. As China and others take your jobs you can use the free time of your population to massively improve your own country.

If you fail to invest or your investments are a drag, then it can be a curse of course.

[zoshi]

In just 16 years at 2.6% CPI, money will lose 50% of its purchasing power. Everyone should protect their savings against inflation.

[fieryskiff22]

Quick check on the arithmetic?

With continuous compounding, 1/2 = (1-2.6%)^n = 0.974^n n = log(1/2) / log(0.974) = 26.3 y

Same answer on a Deci-Lon.

With annual compounding, HP-12c gives 27y

[zoshi]

I said 50% not 100% :) At 2.5% in 16 years $100 is $148.45