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

  • KevonLooney
    43·
    9 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
      22·
      9 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.

      • gayhitler420
        11·
        9 months ago

        lol at countering nber, the group that literally figures out if there’s a recession or not with investopedia.

        Clown world moment.

        • rothaine
          1·
          9 months ago

          It’s a digest of a paper co-authored by a former Fed chair, so yeah I’m a bit suspicious of the exclusion of money supply in their modeling. And like I said, I’m always more suspicious of any source that tries to blame the working class for inflation.

          But sure if NBER preaches, it must be gospel.

          • gayhitler420
            1·
            9 months ago

            Don’t you put that evil on me.

            It’s just funny to counter one of the most institutional and official sources with one that’s a rung above clickhole.

            No hate, I’m gonna fold that bit up and save it in my wallet for the right time.

            • rothaine
              1·
              9 months ago

              Ok sure, I could’ve spent some time digging for a more academic source instead of the first result, but I try not to spend too much effort arguing with Internet randos, and just demonstrating that there is not consensus seemed sufficient.