One should expect something of a lag after a big pile of money is borrowed into existence (spring of 2020) before it affects prices. 12-18 months strikes me as about right.
Of course the spending spree by the FedGov is by no means the only thing that has contributed to the inflationary pressures we're seeing now. There are still plenty of supply-chain issues, and in a relatively free market, when things are in short supply, goods go to the highest bidder. My own business has paid 5-10 times the normal price for certain semiconductors from the secondary market on a couple of occasions. We didn't like it very much, but it beat the alternative, which would have been to tell our own customers that we have no finished product available for them. I've not raised my prices, but I think I'll likely have no choice early next year.
How much of a lag one should expect would likely be dependent on the overall velocity of money--which dropped to near zero in 2020 and has largely remained there.
Yet even accounting for a time lag of up to 12 months, its difficult to establish a clear correlation between money supply growth and inflation. When you look at the money supply growth and inflation rates from 1997 onward, there are only 16 periods where an increase in the money supply more than 1 standard deviation above the historical average translates into an inflation rise more than 1 standard deviation above the historical average. Shift the timelines by a year and you still have only about 16 period where significant inflation matches to significant money growth.
The trend line of the federal deficit vs inflation also cuts against that thesis--as since 2020 we have the deficit decreasing and inflation increasing. The prevailing wisdom says the exact opposite should be true.
And whether you look at a graph of money growth overlaid with inflation as percentages or whether you index the values to a common period, in no time span can one see inflation reflecting the pattern of money growth--not even 12-18 months down the road.
Considering the magnitude of the initial money supply expansions in 2020, even with a time lag of 12 months in January of 2021 there should already have been true hypernflation (we're talking Argentinian and Turkish levels >60% year on year). Even Shadowstats isn't reporting that (John Williams' public charts show his inflation calculations peaking at around 17%, roughly double the "official" number).
In article after article, the claim gets repeated that the inflation we are experiencing is the result--with an inference that it is solely the result--of the massive monetary expansions of quantitative easing. The narrative is describing a correlation that cannot be established within the data.
One should expect something of a lag after a big pile of money is borrowed into existence (spring of 2020) before it affects prices. 12-18 months strikes me as about right.
Of course the spending spree by the FedGov is by no means the only thing that has contributed to the inflationary pressures we're seeing now. There are still plenty of supply-chain issues, and in a relatively free market, when things are in short supply, goods go to the highest bidder. My own business has paid 5-10 times the normal price for certain semiconductors from the secondary market on a couple of occasions. We didn't like it very much, but it beat the alternative, which would have been to tell our own customers that we have no finished product available for them. I've not raised my prices, but I think I'll likely have no choice early next year.
How much of a lag one should expect would likely be dependent on the overall velocity of money--which dropped to near zero in 2020 and has largely remained there.
https://fred.stlouisfed.org/graph/?g=TSLP
Yet even accounting for a time lag of up to 12 months, its difficult to establish a clear correlation between money supply growth and inflation. When you look at the money supply growth and inflation rates from 1997 onward, there are only 16 periods where an increase in the money supply more than 1 standard deviation above the historical average translates into an inflation rise more than 1 standard deviation above the historical average. Shift the timelines by a year and you still have only about 16 period where significant inflation matches to significant money growth.
The trend line of the federal deficit vs inflation also cuts against that thesis--as since 2020 we have the deficit decreasing and inflation increasing. The prevailing wisdom says the exact opposite should be true.
And whether you look at a graph of money growth overlaid with inflation as percentages or whether you index the values to a common period, in no time span can one see inflation reflecting the pattern of money growth--not even 12-18 months down the road.
https://fred.stlouisfed.org/graph/?g=TQmR
https://fred.stlouisfed.org/graph/?g=TQZg
Considering the magnitude of the initial money supply expansions in 2020, even with a time lag of 12 months in January of 2021 there should already have been true hypernflation (we're talking Argentinian and Turkish levels >60% year on year). Even Shadowstats isn't reporting that (John Williams' public charts show his inflation calculations peaking at around 17%, roughly double the "official" number).
http://www.shadowstats.com/alternate_data/inflation-charts
In article after article, the claim gets repeated that the inflation we are experiencing is the result--with an inference that it is solely the result--of the massive monetary expansions of quantitative easing. The narrative is describing a correlation that cannot be established within the data.