Your points are valid about there being truly unusual geopolitical factors right now which fuck up supply chains, shipping routes, and overall availability of goods.
But it's ignoring something much simpler: if you print more money, you're directly obfuscating supply and demand by devaluing your currency. The notion that it's not money printing because it's held by financial institutions is as credible as trickle-down economics. There's still more money in the system, and that system is purposefully using the extra cash to prop up the stock market. You know what the best hedge against unsustainable debt is? Devaluing the currency.
Yes, I am making some simplifications. If you really want to get into the details of quantitative easing in the US we can, but honestly it's just noise. You can't escape the concept of supply and demand no matter how opaque your policies are. The M2 money supply has had an enormous increase in just the past few years.
Japan has been printing money hand over fist for decades - more than tripling the money supply since 1990 - but their CPI has been dead-ass flat. [1] Money supply matters, but more money doesn't immediately mean higher prices. More money doesn't necessarily mean each unit is worth less than before because it doesn't exist in isolation. What you do with that money matters.
[edit] Concrete example: if I print money to build a new port, and that new port leads to a decrease in shipping costs? Then prices go down, meaning each dollar is worth more than before I increased the supply. New money is an investment. It's the liability side of the books. The asset side of the books (what we got for it) matters too!
This is where the argument breaks down in my view. You cannot effectively centrally plan an economy. Granting these special favors for pet projects creates malign incentives. Those who are closest to the money spigot benefit disproportionally as compared to those who receive the newly printed money later. See also: Richard Cantillon.
The decentralized market price discovery mechanism is disrupted by the malign incentives created by the money printers. Even if central planners could acquire enough information to effectively plan an economy, the problem of corruption and malign incentives remains.
That said, central planners cannot effectively out-compete the decentralized price discovery mechanism of a generally unhampered market. They are limited and fallible bureaucrats, where the market participants are legion. Institutional group-think is yet another obstacle.
Finally, even if you could conclude that your centrally planned port was not a bad investment, can you measure the cost of lost innovation? The opportunities not taken by the market because capital was misallocated by central planners for a port?
Japan is a bit of a special case. They had extraordinarily high private-sector credit growth before their bubble burst. Now their private-sector debt has been dramatically shrinking, which would have led to deflation.
Basically, Japan's public-sector debt growth is offsetting private-sector debt shrinkage.
Fair. I'm not an expert on the economy of Japan (although I know a little bit). But in this case the money being printed is being used to prop up the stock market. It's essentially creating an artificial bubble.
So yes, you're right. How you use the money matters. But the US government isn't using it to help consumers, it's using it to help corporations.
I did not articulate this in my original comment, and concede you're (mostly) right. I maintain that "the money printer goes brrrr" is the main issue in the US, but admittedly I'm not providing as much data as you and your arguments aren't bad.
btw to be clear, I don't think that the increase in money supply has had zero impact. I think it's actually a key part. Folks saved a bunch of money - to your point, invested it in the stock market - and then when restrictions lifted, they went out and bought stuff. This spike in demand contributed to inflation, no doubt, and it was in part created by new money.
I'm not sure that the alternative - at least from the Fed's perspective - of allowing the US to enter a deflationary spiral in 2020 would have done us better.
I also think that these issues are transient, and caused by a very poor transition out of COVID lockdowns and into normalcy. It's taking longer than I thought to resolve, but I do think that not taking too much dramatic action and letting the market sort it out is the path forward.
I think the amplification of these issues is transient, but that the overall trend is still up. I believe CPI will come down again soon, but then start to trend up again without drastic measures from The Fed (much more than raising rates by 25 basis points a few times a year like they're currently discussing).
The world economy is complicated though. Nobody was predicting covid a few years ago. Not many people were predicting a war last year. Who knows what crazy wrench reality will throw in the system soon.
> Concrete example: if I print money to build a new port, and that new port leads to a decrease in shipping costs? Then prices go down, meaning each dollar is worth more than before I increased the supply. New money is an investment. It's the liability side of the books. The asset side of the books (what we got for it) matters too!
Only if that new port resulted in value added equal to the money printed. If the port only adds, say, half the value it's going to lead to inflation.
If you just print a bunch of money to give to unemployed people, it's going to lead to inflation.
It's worse than just giving out money to unemployed people, I know people with jobs (working for large corporations, not a business of their own) that applied for and got six figures worth of fraudulent PPP loans.
Wanna guess how many people actually get caught for that? I guess we'll find out in a year or two. I'm guessing almost none.
... which would give printing more Yen outsize impact. There's demand for new US dollars all over the world. There's far less demand for the Yen. The Yen, for what it's worth, is the preferred Asian reserve currency. And the 'petrodollar' is a consequence of US power, it doesn't give the US power.
>But it's ignoring something much simpler: if you print more money, you're directly obfuscating supply and demand by devaluing your currency.
Is this even a logical proposition? If people save $100 dollars, what's wrong with adding $100 dollars to the economy, assuming no price controls like the massively distorting zero lower bound that artificially keeps interest rates from entering negative territory to signal overabundance of capital. This artificial price control forces all capital to be utilized at capacity (endless growth fallacy) or destroyed (broken window fallacy) to reduce the abundance of capital.
After all, if every product has a price at which it is guaranteed to be sold, there is going to be an interest rate that guarantees that capital will be accepted by someone even if that interest rate is negative.
Imagine if you produced trash that costs $10 to dispose of, or in other words, the price of that trash is -$10 but then the government stepped in and guaranteed to buy that trash for $0. Suddenly a lot of people will keep producing more trash.
>There's still more money in the system, and that system is purposefully using the extra cash to prop up the stock market.
That's what happens when you disable market signals like negative interest rates. Since you have obligated yourself to buy the trash your economy slowly turns into a bigger and bigger trash heap. Before you say nonsense like negative interest rates prop up the stock market, think about how a reduction in the money supply is supposed to prop the stock market up, it's completely illogical.
>You know what the best hedge against unsustainable debt is? Devaluing the currency.
No, the best solution against unsustainable debt is to tell the owners of financial capital that they have accumulated financial assets beyond your desire to be in debt, i.e. the interest rate that you would consent to is not positive anymore. As it stands right now. That market signal is completely dead. There is nothing in this market that can say "I've had enough of the debt nonsense, I do not want further debt, I will not accept further debt" as a 0% interest rate allows people to keep saving more and more endlessly which means others must be more and more in debt unless they want a recession or depression and lose their job.
When you think about it, all these rich savers are just lying to themselves by saving beyond the desire of society to let them save which is obviously going to lead to inflation. After all, you have these tokens and no meaningful agreement on the other side that they are worth anything, you just forced that obligation upon them but that doesn't mean they will actually fulfill it, it's not like they agreed to do that. The interest rate that they would agree to isn't positive.
But it's ignoring something much simpler: if you print more money, you're directly obfuscating supply and demand by devaluing your currency. The notion that it's not money printing because it's held by financial institutions is as credible as trickle-down economics. There's still more money in the system, and that system is purposefully using the extra cash to prop up the stock market. You know what the best hedge against unsustainable debt is? Devaluing the currency.
Yes, I am making some simplifications. If you really want to get into the details of quantitative easing in the US we can, but honestly it's just noise. You can't escape the concept of supply and demand no matter how opaque your policies are. The M2 money supply has had an enormous increase in just the past few years.
https://fred.stlouisfed.org/series/WM2NS
I admit I have not had a chance to look at all your links as of writing this comment.