[littlestymaar]

> Money is subject to the same laws of supply and demand as everything else, and when there's more of it, it's less valuable.

But somehow, none of the post-subprime-crisis QE had any impact on the price, how surprising…

The monetarist take on inflation as a product of money supply died in that period (so much that monetarist proponent invented a new concept of “asset price inflation”).

Inflation in general[1] is not and has never been a money supply topic: it's a supply and demand of goods and services issue. That's why inflation rose in 2021 in the US when the supply chain from China was disrupted, and not so much in the EU which is less dependent on China, despite similar monetary policies on both sides of the Atlantic. And why inflation ended up raising in the EU when Russia invaded Ukraine, because the gas supply was vulnerable.

Inflation isn't even related to the “value of money”, in 2021, the “value of 1$” grew on the FX market, at the same time inflation was raging in the US. In fact, during that year, if you were paid in dollar while living in the Eurozone (like I am) your purchasing power grew (because the price variation between EUR and USD was bigger than inflation in the Eurozone).

Another nail in the coffin of this urban legend is the Eurozone itself: the monetary policy is controlled at the EU level, yet inflation in 2022 has been very different between one country to another (from 5 to 15% YoY, that's a threefold difference!).

[1] hyperinflation is another topic, but even there, it's more of a “loss of confidence in the value of currency” than a supply and demand issue.

[SamPatt]

Astounding that you're claiming monetary policy can lead to hyperinflation, but not inflation. As if those are unrelated concepts.

You are very eager to put nails in coffins and claim that the common sense understanding of inflation (if you print too much money it loses value) is an urban legend.

[littlestymaar]

> As if those are unrelated concepts.

They are. A slow/moderate increase in prices (even 20% a year) has nothing in common with “the salary you've received on the first of the month has lost most of its value by the end of the month”, the social and economic causes and consequences of these two events are completely different.

> that the common sense understanding of inflation

It's only “common sense” because Milton Friedman convinced a generation of people of it, but it goes pretty much against all empirical evidence (including in recent time). The sun and stars don't orbit around a fixed earth either, btw…

[SamPatt]

I'm listening to the audiobook "The Price of Time" right now and it gives chapter after chapter of empirical evidence.

Friedman was absolutely not the first economist to notice the connection between monetary supply and inflation. Locke wrote against artificial low interest rates in the 18th century.

[littlestymaar]

Locke probably got it from Cantillon (who made a fortune out of John Law's system, how ironic), but this reference probably summarizes the biggest mistake neoclassical economists have been making, ignoring what happened between the 18th century and the 20th one: the Industrial Revolution.

In a pre-industrial economy, the total economic output is essentially fixed (crop production, which makes the vast majority of the economic output, mostly depends on the weather) and supply is always the decisive factor in an economy.

In industrial economies however the economic output mostly depends on the demand: if there's demand for something, then the industries will just ramp-up production to fit the demand (be it for smartphones or aircraft carriers like in WWII). In this regime, you don't really have monetary-induced inflation, until the industrial output can't follow for some reason (in most cases, the output in actually decreasing, meaning that stopping money emission won't solve the issue either, and you need to actively contract the economy to curtail inflation (like Volcker did after the oil shocks) or just slow it down a bit to wait until the problem sorts itself out, à la Jerome Powell).