In the past 15 years we engaged in unprecedented fiscal and monetary stimulus, which saw US Govt debt triple to $30T and the Fed balance sheet increasing 8 fold to $9T.
And yet despite 15 years of stimulus we have had persistently low inflation for all except the last 2 years or so, the first half of which was very clearly driven by supply chain issues.
It’s almost like even if stimulus has had an impact it’s not the only, or even the primary driver.
We've had inflation. Inflation was in assets rather than in commodities. Housing is insane, the stock market is detached from reality, billion dollar evaluations for mostly valueless companies. The only reason inflation started hitting consumers is because asset growth reached the end.
No, we have had lower „inflation“ according to the CPI which is a single number for a multi-dimensional and connected phenomenon. The real impact can be seen in the price of large city real estate, tech stocks or luxury goods. Those certainly didn’t have low price increases.
The extra money largely ended up there because a side effect of the stimulus was that safe investments had negative real yields. In response people chased any positive real yield. This is why Pension funds invested in crypto, they could not guarantee their promised growth with just treasuries and aaa bonds.
Inflation is never linear, and tends to over/under shoot.
Under normal circumstances, supply chain issues (otherwise known as supply reduction) results in demand being priced out of the market. But we didn’t do that. We gave stimmie checks, and gas cards, and increased unemployment benefits, and paused loan repayments.
When there’s not enough of thing X it means some people won’t get thing X. Giving people money to make it “more affordable” just pushes price higher without increasing affordability (as the market still settles on a market clearing price).
Japan had the same monetary policy for the same period of time and saw zero inflation.
It's not monetary policy. There's no reason to think that 15 years later some magical thing happened to flush all the pressure that had built up out of the pipes.
It was due to a combination of fiscal stimulus, yes, to a degree - and also supply chain issues, a land war in Europe, shutdowns in China, and myriad other confounding factors. There's been a lot of perfect storms lately.
Having any inflation at all is remarkable for Japan - they've basically had deflation since the early 90s. The measures they've been using to keep inflation that low also look unsustainable (their foreign currency reserves are going to be eaten away).
But supply chain issues have resolved yet inflation is still high?
If you want to understand why the massive expansion of the monetary supply didn't initially stoke inflation, Professor Selgin does a nice job of explaining it.
Basically, the Fed printed new money, but at the same time offered a very high interest rate on Excess Reserves held at the Fed (first time ever in 2008). So banks took the new money, and deposited it back at the Fed because they got a higher interest rate than anywhere else. So at least for the for a while, a lot of the new money never entered the broader economy. Check the Fed's charts on excess reserves. $3.2T dollars was just sitting at the Fed collecting interest.
This was entirely intentional by the Fed. Bernake said "our liquidity provision had begun to run ahead of our ability to absorb excess reserves held by the banking system, leading the effective funds rate, on many days, to fall below the target set by the Federal Open Market Committee. … Paying interest on reserves should allow us to better control the federal funds rate, as banks are unlikely to lend overnight balances at a rate lower than they can receive from the Fed"
The Fed was initially try to "sterilize" the new money by selling Treasuries at the same time (print $1T in money to buy failed assets, sell $1T in Treasuries = net $0 new money). But they ran out of Treasuries, so resorted to printing new money, but incentivizing banks not to use it because otherwise the they'd drive the interest rate way below target.
But yeah, I'm sure it's corporate profits.