I always find it weird when someone's economic model of the world is basically "I hope corporations aren't greedy and don't raise prices too much" Surely there must be something else going on, no?
I'm no tech exec, but this seems fine to me. If your government increases the money supply, ceteris paribus the demand curve (for every product) will shift right. At that point the tech exec can raise their price along with their competitors for an easy win. They're not forced to, but it's monetary policy that made it possible.
You're right of course. I guess I was trying to steelman the hypothetical exec's position as not totally unfounded or unreasonable, not give the final verdict.
A loose monetary policy does contribute to inflation. It's not the sole contributor, but when a lot of money is injected into the system, and the # of goods & services stay the same, inflation occurs.
Increasing production takes time. There's not a magical machine that can double it's production overnight: New machines & factories & supply chains need to be built out, and those can take months at best.
Terms like loose are relative so it’s often associated with unhealthy extremes. But in a growing economy you need to increase the money supply to avoid long term deflation. Further, the economy naturally expands and contracts over time so timing things correctly and a loose money supply doesn’t necessarily mean short or long term inflation.
Of course everyone is operating with in perfect information so it’s impossible to achieve a completely stable currency.
We didn’t get 300% inflation. So clearly the value of all dollars isn’t simply a direct percentage of the size of the US economy or all wealth in the US etc.
To quantify “loose monetary policy,” between 2021 and 2022 the US Fed increased the money supply by 4x. Put another way 80% of all US dollars that have ever existed were created between Jan 2021 and November 2022.[1]
Prior to this event, inflation was tame. After this event inflation exploded. Coincidence? I think not.
Notably, the government then blamed COVID, supply chain issues, and the Ukraine war as the reasons for inflation, but neglected to mention money printing.
So why didnt price go up prior to covid, if the CEO can manage to set prices?
Or is it that they have always set their price to the maximum that their customers will bear, and it's just that now, their customers were willing to bear a bit higher (due to some external cause)?