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
    43·
    10 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·
      10 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.