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by voisin 1884 days ago
But look at the history of the M1 money stock and the history you linked to of the velocity of the M1 money stock. These jokers never pull back on the money stock even after velocity picks up. It just establishes a new normal.
1 comments
PeterisP 1884 days ago
For the last decades they have succeeded in keping the inflation rate where they indend, so apparently the "new normal" larger money stock is/was the appropriate amount for the growing economy. If "these jokers" would have pulled back on the money stock more than they did, then instead of 2% inflation per annum there would be 0% inflation or a deflation, and one of their key duties is to ensure that it doesn't happen.
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voisin 1884 days ago
Inflation doesn’t show up in CPI but it sure has shown up in asset prices as a direct consequence of their unwillingness to pull back on M1. So your initial point that you have to keep reminding people that we won’t see inflation because velocity of money has declined is not accurate. We have seen it in all asset classes and it is because they never, ever pull back on M1.
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imtringued 1884 days ago
You have to consider that if asset appreciation was a mirror image of CPI inflation then rent payments must go up to compensate for the increase in housing prices. They did go up, but mostly in major cities and they didn't catch up with asset appreciation.

Remember, when you get a mortgage to buy a house including land you will eventually have to pay the mortgage back and if you aren't doing so yourself, then your tenants have to do it and their income gains don't exceed CPI as of now (assuming no job switch). Even if you sell, you are speculating that someone else thinks that way and if no such person exists then the price of housing will go down.

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arcticbull 1883 days ago
If a given quantity of assets (let's say 1 SPY share) will buy you more good from the CPI basket this year than last year, that's not inflation, that's a return on investment. It would only be inflation if while the notional price of SPY shares went up the quantity of goods you can buy with it stayed flat or went down.
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