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by trompetenaccoun 934 days ago
Monetary inflation (i.e. in it's purest form increasing the monetary base by "printing" more) is not necessarily the same as what you probably mean by 'inflation rate'. You're probably talking about price inflation, using CPI. Those are linked but not the same.

Bitcoin "prints" around 1.74% currently and it's going to drop below 1% in April. The USD, although one of the more stable fiat currencies, is worlds apart from that. Looking at official Fed data you can see the base has been inflated by massive amounts just in the past 3 years alone! An increase of way over 60%!

https://fred.stlouisfed.org/series/BOGMBASE
1 comments
RandomLensman 934 days ago
Exactly. "Inflation rate" usually denotes price inflation not change in monetary base or similar measures. More money in circulation can mean price inflation, but it doesn't need to.
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trompetenaccoun 934 days ago
Sure. It's just that it generally does since the market as a whole understands scarcity value. The fact that having a much larger supply of something decreases the value of the individual unit is intuitively understood by most. The general public tends to price everything in relation to their home country's currency. They don't see the value of the currency falling, they view it as goods getting "more expensive". They do not usually think of fiat currency as a thing that's traded globally against other currencies and goods, but traders and businesses understand this.

Of course, the fact that the recent spike in monetary inflation coincided with a large hike in consumer prices over the past three years (which working class people have definitely noticed) as well as an asset price explosion, could have just been coincidence ;)

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RandomLensman 934 days ago
That assumes that in increase in monetary base is not matched by an increase in goods and services - you cannot just ignore that part. Also, scarcity as such has no value whatsoever.

FX rate evolution is linked to many things (and sort of a random walk anyway) - I'd say you typically need quite high inflation/rates to see devaluation in line with uncovered interest rate parity type views, short-term it could also work the other way around at times.

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