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by jjeaff
1263 days ago
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No, inflation is not the same thing as increasing the money supply. Increasing the money supply is one of the many things that can cause inflation. But to thing it is the only factor is overly simplistic, sort of Laffer-curve-esque. In that it makes a lot of sense in an economics 101 class but the reality is a lot more complex. For example, if you double the money supply tomorrow but most of that extra money ends up in the bank accounts of the richest people in the world, it will have little effect on the price of avocados, for example. Rich people aren't buying more avocados because now they have $100m instead of $50m. But you can bet you would start to see inflation for yachts, private air In other words, money supply only affects inflation in as much as it affects supply and demand. |
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What account for money supply can be gold (Spain Inflation, 16th century), diluted gold coins (look for monetary crisis in Roman Empire), paper and scriptural money emission backed by unchanged gold possession (French Franc, after 1913 ; US dollar in the late '60), paper money not backed by gold (look for chinese ligatures), scriptural and paper money backed by a mix of other currencies (in the form of foreign government bonds) and gold (central bank system after 1973)...
...And homeland government debts (central banks system after 2008), which is called debt monetization https://en.wikipedia.org/wiki/Debt_monetization, which was, strangely enough, the polite way to say printing money when I was a kid.