[hgomersall]

But that doesn't suggest that the critical variable is money supply. It just suggests there's a correlation. There are plenty of ways of increasing the money supply that does nothing at all. Pursuade the fed to give me a trillion trillion dollars and I'll show you by not spending it (though I might spend a few mil for keeping it safe, but that's not going to do much).

[VirusNewbie]

If you literally buried the money then yes, you are correct but in effect that is basically destroying it.

But what would you do to not spend it? Put it in the bank? Buy bonds?

[hgomersall]

The point is that lots of monetary operations are consumption neutral, including buying bonds. The only thing that actually matters from a price perspective is when a real resource gets consumed. People having more money can push the price of real goods up for sure, but the marginal propensity to consume by individuals goes down with higher relative wealth.

There's another very important effect which is the spending on things that matter induces taxation (employment taxes to deliver the thing, sales taxes etc). This is a geometric series reducing the money supply on every transaction of real goods. What matters is the flow, not the stock.

https://new-wayland.com/blog/structural-deficits-are-deflati...