Edit: new and improved image, now with 100% less support! Used my expert photo editing skills to change “supporting” to say “voting for”

  • KevonLooney@lemm.ee
    41·
    5 months ago

    Inflation wasn’t caused by “printing money”, or even COVID PPP loans being unpaid. It was mainly caused by businesses realizing they controlled many aspects of people’s lives.

    When people were paying $50 for some toilet paper, most daily essentials companies realized that people were willing to pay more than they expected. There are very few tp companies and not many Americans install a bidet.

    Americans mostly got raises during COVID and that allowed many companies to raise prices. You always have to eat, clean your house, wash your clothes, go to the bathroom, etc. This is just the consequence of a lack of competition among companies in the US (and other countries).

    • rothaine@lemm.ee
      22·
      5 months ago

      I agree with you that that is a large factor, and certainly a problem, but inflation has always been very strongly correlated with the money supply; you can’t just simply ignore the “printing money” aspect of it.

      • KevonLooney@lemm.ee
        43·
        5 months ago

        No, money supply is not strongly correlated with inflation. Right now M2 is shrinking while inflation is still positive. That wouldn’t happen if they were strongly positively correlated.

        https://fred.stlouisfed.org/series/M2SL#

        Here’s better explanations:

        Rising commodity prices and supply chain disruptions were the principal triggers of the recent burst of inflation. But, as these factors have faded, tight labor markets and wage pressures are becoming the main drivers of the lower, but still elevated, rate of price increase.

        https://www.nber.org/digest/20239/unpacking-causes-pandemic-era-inflation-us

        Meaning “people have more money, so producers increased prices”.

        • rothaine@lemm.ee
          22·
          5 months ago

          Right now M2 is shrinking while inflation is still positive. That wouldn’t happen if they were strongly positively correlated.

          We already see that there is a time lag effect, so does that actually matter?

          Anyway, this disagrees with the paper you linked:

          https://www.investopedia.com/ask/answers/042015/how-does-money-supply-affect-inflation.asp

          It’s also curious (from reading the abstract) that the paper you linked didn’t seem to include money supply in their model? Was that deliberate?

          But I’m also just generally skeptical of anything that tries to blame labor or wages for inflation.