[hgomersall]

Friedman was a charlatan and monetarism was trivially debunked when he came up with it. The 60 years since have not been any more kind to it. Don't confuse stocks with flows. The whole idea of money supply as a useful metric needs to be put to bed; one would have thought the 13 years post GFC would have made that apparent.

(Of course, the Austrians have a peculiar notion that inflation can by definition only be considered as such if it's associated with increased money supply. Another reason to ignore them completely)

[VirusNewbie]

Huh. So if I understand correctly, if we halved the money supply tomorrow, the price of everything would stay the same?

[kelseyfrog]

How would you halve the money supply?

[VirusNewbie]

it's a thought exercise. I'm asking if you think that would the consequences be?

[hgomersall]

Between 2008 and 2020 M2 pretty much doubled and prices barely moved anywhere. This was intentional policy for the purpose of increasing inflation which stayed doggedly around zero. What does this tell us? Pretty much nothing because money supply is a useless measure.

What would happen if we halved it? Dunno, but to achieve that, stuff has to happen, and depending on that stuff, you might get price changes. I expect if the gov engaged in QT to achieve it, very little would happen.

[VirusNewbie]

>Between 2008 and 2020 M2 pretty much doubled and prices barely moved anywhere

Except Real estate prices more than doubled. Also the Dow went from ~11k to 32k . So almost triple.

[hgomersall]

And yet the price of a cabbage stayed exactly the same. Oh, we also had close to zero interest rates, might that have something to do with peoples' appetite for higher mortgages and shares over bonds?

[VirusNewbie]

>Oh, we also had close to zero interest rates, might that have something to do with

YES! YES! YOU ARE CORRECT, THAT'S MY POINT. Lowering the interest rates is how you EXPAND THE MONEY SUPPLY.

[kelseyfrog]

I don't think the thought exercise can exist in our reality then. Our reality requires a receipt for money supply to be halved.