[shock-value]

Are you implying that it's impossible to draw such a conclusions from particular events such as those of 2020? Or that an increase in the size of money supply does not promote price inflation, all else equal?

Don't think there is much credible evidence or opinion regarding the latter.

[colinmhayes]

The empirical evidence that money supply increases don't necessarily cause infaltion is https://fred.stlouisfed.org/series/M2SL from 2009 to 2019. Money supply doubled and inflation was non-existent. Obviously this is an incredibly complex topic, but there was at least some reason to believe inflation wouldn't be as high as it has been. There are also many reasons beside money supply inflation for the rise in price inflation.

[shock-value]

The key phrase is of course "all else equal". A lot was going on in that decade that could (and is) argued to have been an opposing deflationary force. Worldwide demographics and productivity improvements, in particular. (On a separate note, much of that is or will be slowing/reversing in the coming years.)

To argue that an increase in money supply wouldn't lead to price inflation (again, all else equal) implies that the difference would just be hoarded indefinitely rather than used to buy anything, which seems unlikely just on the face of it.

[colinmhayes]

Sure, but all else wasn’t equal during covid, so I’m not sure that’s a fair addendum.

[shock-value]

I'm just arguing against this general idea that "increase in money supply doesn't cause price inflation". Which doesn't even really make sense because prices are measured in units of money. But the further implication, that Fed policy has no impact on prices, is just wrong to me and reflects some kind of misunderstanding.

[lesuorac]

> all else equal?

Reality is never all else equal.

---

> Are you implying that it's impossible to draw such a conclusions from particular events such as those of 2020?

That's not my claim at all. In fact I've invited the person to link me to their article explaining their analysis of 2020 and why it would lead to inflation in 2022. My point is strictly that people always claim that X is going to cause inflation and then just wait until inflation occurs to say "Aha, X does cause inflation" while doing 0 analysis to show that it was X as opposed to literally any other reason.

[shock-value]

> Reality is never all else equal.

Agreed, but that's not really relevant to the discussion.

> My point is strictly that people always claim that X is going to cause inflation and then just wait until inflation occurs to say "Aha, X does cause inflation" while doing 0 analysis to show that it was X as opposed to literally any other reason.

But we are talking about the money supply. Prices are measured in units of money. You are suggesting that there is not a reason to think that changes in the size of the money supply influence price inflation. That makes no sense. Unless that additional money is just being systematically hoarded which seems unlikely in the long run.

Put another way, a mismatch between the money supply and the demand for money (for use as a medium of exchange) is essentially what price inflation is, almost by definition. So whatever the underlying "cause" of inflation, it's also always fair to say that the money supply was or became too large to keep it in check.