Hacker News new | ask | show | jobs
by nodemaker 1189 days ago
Lol so according to you the money supply can increase 10x but as long as the cost of apples (or things in the CPI basket) is same, there is no inflation. Am i right?

I think you are trying to say that CPI and Inflation are the same thing.
2 comments
arcticbull 1189 days ago
Money in a fractional reserve system operates not on a push model but on a pull model. You do not 'push' money into the system. Money is created when loans (and corresponding obligations to repay said loan) are created. The increase in supply was driven by an increase in demand. Your model is incomplete. You'll have to work a specific example - how would the supply suddenly triple? Who would get that money? What would they do with it?

> I think you are trying to say that CPI and Inflation are the same thing.

I think you are trying to say that money supply growth is inflation, it is not. Even the rejected Austrian school would agree.

link
lumb63 1189 days ago
The increase in money supply was absolutely not driven by an increase in demand. Supply increases were used to grow demand. Why else would it be called “stimulus”?

The supply did grow and the money went to banks, to the US government, etc. You can look at the Federal Reserve’s balance sheet and see entries for US treasury bonds, mortgage backed securities, etc. The US government then went and spent that on things, and the value of mortgage-backed securities increased which decreases the return on the investment and thus encourages banks to take on higher-risk investments. These activities drive inflation. So, no, an increase in the amount of money isn’t inflation, but a higher quantity of money supply times velocity does, by definition.

link
SideQuark 1189 days ago
We're not in a fractional reserve system. Banks can borrow arbitrarily from the fed, and routinely do so, and don't have reserve ratios. Many countries have moved to this model over the past few decades, including the US. The Fed has papers on this explaining the how and why of the newer system.
link
HDThoreaun 1189 days ago
Yep, if goods(not capital) don't change in value there is no inflation.
link