[rogersnm]

> It is about causing capital investment to be less lucrative than tying the money up in treasuries

Money isn't tied up in treasuries, money (loosely bank deposits and cash) and treasuries are two distinct concepts. You can trade money in exchange for treasuries, but then the previous holder of the treasuries has the money, and you have the treasuries, it doesn't tie the money up.

The amount of value captured in treasuries is a function of the total government debt outstanding, and a way to increase that value is to issue more Government debt (in which case, the money goes to the Government to then spend, it still isn't tied up), however the Government is actually disincentivised to do this as their cost of borrowing (interest rates) goes up.

> That’s why the last huge injection of money in 2008 didn’t cause inflation.

The "injection of money in 2008" (the creation of central bank reserves) didn't cause inflation because the overall quantity of broad money still fell over that time period (https://fred.stlouisfed.org/series/DDOI07USA648NWDB). This was because of the "credit crunch" occurring at the time, where commercial banks where massively reducing their lending activities. The same is not true now, the creation of additional central bank reserves in the past 2 years has directly translated into more broad money, and we have inflation as a result.

[bloodyplonker22]

In addition, here's one big difference: the Biden Administration printed 1.7T worth of handouts, which was mostly spraying helicopter money directly to the people. During the financial crisis of 2008-2009, TARP was not mostly helicopter money given directly to the people. It was given to institutions, so it was much more indirect. With the Biden Administration's money spraying, a good amount of that taxpayer money went to covid relief scammers.

[didibus]

I'll try to give you the most charitable read, but even if I do, the simple fact that inflation is happening world wide seems like there's no way the cause can simply be what you said.

It also ignores the flip side. COVID relief packages have also helped in many ways, it's unclear what outcome is worse, current inflation or what else would have happened without that assistance.

Finally, I tried to do some fact checking, and what I found is that Trump actually provided even more handouts, 2.2 trillion in COVID handouts through the Cares ACT under Trump, while Biden only provided 1.9 trillion as part of the American Rescue Plan.

And if you look at the direct payments of those plan, Trump totalled 459 billion in direct handouts, and Biden totaled 402 billion.

So Trump actually gave more Covid handouts than Biden did.

Now the argument that COVID handouts might play a role in the inflation is okay, maybe it does a little, but your singling out of Biden seems biased partisanry, and it makes it even harder for me to take you in good faith.

[makomk]

While you're right that this was bipartisan, worldwide inflation could well have been least partly the result of the US government handing out too much money. Here's how: the US actually had the highest inflation in the G7 until earlier this year. In order to get that under control, the Fed has been hiking interest rates more aggressively than the rest of the developed world. This has caused other currencies to lose value against the dollar, increasing the cost of imported goods priced in dollars like oil and gas and driving up inflation elsewhere: https://edition.cnn.com/2022/08/07/investing/strong-dollar/i...

The US dollar's status as the world's reserve currency has strange and counterintuitive effects like this which make their screw-ups everyone else's problem.

[rogersnm]

> This has caused other currencies to lose value against the dollar, increasing the cost of imported goods priced in dollars like oil and gas and driving up inflation elsewhere

If I have Pounds (GBP) and I need to buy Oil and settle in Dollars (USD), I exchange my Pounds for Dollars, and then I exchange my Dollars for Oil. The price of the Oil in Dollars doesn't matter to me, only the overall price of the Oil in Pounds. It has no effect on how many Pounds I spend if the GBP:USD is weaker now than it was 1, 2 or 5 years ago, it only matters what the net GBP:Oil exchange rate is.

The only time strengthening/weakening of the Dollar can have an effect is if the price moves between the two exchanges, but given how short settlement windows are, this is somewhat irrelevant.

In a system of free-floating exchange rates and absent of supply side shocks, inflation is entirely a domestic phenomenon. The reason why the entire G7 have the same problem is because they all experienced the same pandemic, and their respective Central Banks all took the same action (to increase the money supply).

Foot notes:

[1] We have since layered a supply-side shock on top of this, which has pushed up energy prices in many currencies, but this is not because of the strengthening of the Dollar, it is because many nations wish to minimise the amount of Oil & Gas they buy from one of the largest exporters of said Oil & Gas, effectively reducing supply.

[2] A strong Dollar can cause problems when foreign nations borrow in Dollars (i.e. they borrow Dollars rather than their domestic currency). As the Dollar strengthens, this means they have to sacrifice much more of their local currency to repay the debt, which can cause significant problems. (Editors note: try not to borrow in someone else's currency if you can avoid it.)

[nostrademons]

The reason inflation is happening world-wide is because all major governments are following roughly the same policies. They all gave various forms of financial assistance to their citizens to get through the lockdowns. They also all held interest rates down, below their natural levels, to stimulate economic growth during the recovery. Except for Turkey and Russia, most of them are starting to raise rates again now that the U.S. is.

There's a competitive aspect to central bank policy: if the U.S. drops rates but other countries don't, their exports become more expensive and hence relatively uncompetitive in the world market, their manufacturing sector loses jobs, and they get thrown out of office. If the U.S. raises rates but other countries don't, their currency drops in value relative to the USD, their imports become more expensive, this fuels inflation in their home country, and they get thrown out of office. Therefore there's a strong impulse to mimic U.S. monetary policy. This also makes the reaction of other countries a constraint on the actions of the Fed; they cannot make changes willy-nilly without causing severe dislocations to the global economy.

You're right that this is not a Biden vs. Trump issue, and that Trump also pursued policies that were highly inflationary. This is a "humans are predictably irrational" issue. They nearly always pursue policies that fix the problems they have now, even at the expense of causing problems that are highly likely to occur later.

[didibus]

I think I have a bit of an issue with your overconfidence on this.

There's no proof of this it seems, while I agree it's one of many hypothesis, I find it crazy that you can jump from the hypothesis to conclude it's true just like that.

How do you simply dismiss all the other possibilities and compounding factors? There was a never seen before global pandemic, there was major disruptions in production and sourcing of goods, there was a major attrition and rotation of the labor force, there's the conflict with Russia, there were dramatically overvalued stocks, there was a trade war, there was a ton of people that died, etc.

I'd be suspicious of anyone who claims they just know the truth here, follow your guts isn't a proven way to determine what's really happening. I need some more proof, a simulation model, some actual experiments, etc.

The intuition of experts is often more likely correct, but economists are very divided here, to me it still feels like we don't know the cause of the inflation, we don't properly understand why it's happening and how to fix it.

Another aspect that's also been bothering me is that it isn't clear if inflation is a problem or not. Say it was caused by too much money having been injected, ok prices go up, but everybody has extra money, so it evens out, and doesn't really mean anyone is worse off.

Inflation doesn't really seem like it necessarily implies people are worse off, especially from the point of view of: would that person had been worse off if they'd have been evicted from their home during the pandemic and lost their job and not been given out support? Or are they worse off having had that help to make it past that and now have to deal with some inflation?

Especially assuming the inflation is due to increase money supply.

Like I just feel the actual effects of inflation are also not clear.

If inflation is driven by a loss of jobs, lack of goods, and difficulty sourcing materials, that's bad, even ignoring the inflation that's bad. If inflation is caused from too much money but there's still enough jobs, goods, and sourcing is easy and cheap, is that bad?