[anilshanbhag]

I started reading about M1/M2/M3 about a year ago, it is a fascinating topic. You are right about inflation being a function of money supply and velocity. Once you start to understand what is happening - it raises so many questions which are hard for a novice to answer like what happens if velocity increases? M1SL has always increased, can it be decreased? Incessant money printing is shafting the savers - should savers just have bought Bitcoin?

[arcticbull]

My personal take? Inflation affects cash - dollars - only. Not investments. Bitcoin and other cryptos are 100% inflation resistant just like investing in SPY shares, or in real estate, or in ham sandwiches. Once you're not holding dollars, your goal is to find the optimal productive asset based on constant dollar rate of return. Inflation affects the units of measurement of invested value, not the invested value.

For the record, on average across the US, house prices on a dollars per square foot basis have kept pace with inflation, as have wages. [1,2] Should they not have? Maybe, but that's a fiscal policy matter, not a monetary policy matter (i.e. take it up with Congress, not JPow).

Inflation is a forcing function to invest your idle capital as idle capital is worthless. GDP = Supply * Velocity. If you hold your capital, you're lowering the GDP.

Yes supply tends not to drop, the Fed prefers to allow the economy to "grow into" the supply, through increasing productivity, increasing population and through the 2% inflation target.

[1] https://fee.org/articles/new-homes-today-have-twice-the-squa...

[2] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...