[jkepler]

No real surprise here, considering that over 90% of existing USD money supply has been created since 2008.[1] Unless the real economy grew 90%, that monetary creation must necessarily push prices up, but due to information assymetries, price increases happen unevenly.

[1] https://fred.stlouisfed.org/series/M1SL

[SketchySeaBeast]

But until this year inflation didn't really increase over average[1], and we certainly can't blame this year all on the creation of new money, and it certainly didn't increase by 90%.

I'd be interested in where you think all that inflation is hiding. Because you're saying it has to be somewhere, right?

[1]https://www.officialdata.org/us/inflation/1800?amount=1

[nostrademons]

It all went to the Bay Area and other places where numerous tech workers congregate, along with NYC and other places where finance workers congregate. It's spilled out into the rest of America to the extent that these people move around.

Since 2008, home prices here have gone from about $1-1.2M for a modest home in Cupertino or Los Altos to about $3.5M for that same home. Restaurant meals have gone from about $9 for an entree to about $30. Daycare is now $2000/month for an average place, or $3500/month for a good one.

This is an example of a Cantillon effect [1]. Inflation doesn't affect prices uniformly. New money enters the economy at specific points (usually the financial industry), and then it pools in firms that have strong pricing power (currently the tech industry). People close to those areas experience sharp inflation while also seeing their wealth and living standards rise sharply relative to the broader economy. People not in those areas experience the money injection as an increase in inequality, not as inflation. The money doesn't circulate effectively between the "new" and "old" economy, because the "old" economy produces little that people in the "new" economy want to buy, and when they do, there are usually ample competitors to hold down prices.

The thing is that the pandemic and now the Biden administration's policies to build back from it have in some sense broken that dam that prevents money from circulating, and so we're beginning to see more broad-based inflation. Remote work let people on Bay Area salaries work anywhere, which means you might have multiple people with $500K+ compensation bidding up home prices and spending money at restaurants in what was previously a sleepy rural area. Direct stimulus payments inject money into ordinary people's bank accounts rather than into the financial industry, so inflation resulting from them is broad-based rather than concentrated in financial assets. Infrastructure spending will shift the Cantillon effects to areas like government contractors and raw materials like steel & concrete. And policies that are specifically designed to alleviate inequality will also result in inflation: the flip side of having lots of money is that everything you spend it on costs more.

[1] https://mattstoller.substack.com/p/the-cantillon-effect-why-...