I can reveal that my household has now taken the sensible step on using sunflower oil for frying instead of the extra virgin olive oil which has shot up in price.
I'm sure putting up interest rates would make the problem go away.
Well... We had ten years of steady 2%-ish annual price rises, then the government handed out $2,000 checks to everyone, and all of a sudden everything got 20% more expensive practically overnight. The cause-effect was pretty clear. And then, the map you included shows that many countries saw inflation rates far in excess of the 7-8% typical of developed economies at the time.
A similar argument to yours applies to the 1970s, to wit that the inflation of that era was in large part caused by high oil prices rather than government fiscal or monetary policies. Likewise the "disinflation" from 1982-2020 was as much or more about globalization, offshoring, and China than anything the Fed was doing.
tldr is that while many factors besides government fiscal and monetary laxity contribute to inflation, government policies are certainly important - especially when said policies really go off the rails as in eg Venezuela or Argentina.
The next posts in this series will cover some of these points. You're right about inflation being a result of multiple causes. But you're wrong about other things.
>Well... We had ten years of steady 2%-ish annual price rises, then the government handed out $2,000 checks to everyone, and all of a sudden everything got 20% more expensive practically overnight.
Gee, do you think the pandemic may have had *something* to do with that? The month after the checks went out was the single biggest receivables to the credit card industry of all time. The next checks went mainly to back rent. This is data from the New York Fed. Those things don't contribute to inflation.
There's now reliable data that at least 1/3 of inflation was caused by corporations using the inflation excuse to hike their margins.
>especially when said policies really go off the rails as in eg Venezuela or Argentina.
Money printing is *symptom*, not a cause, of hyperinflation and usually has to do with foreign exchange rates and borrowing. Central banks don't wake up one day and decide to start "printing money" for no reason. Most money creation is through bank lending.
There's a pretty robust effort to gaslight people about these topics. Not saying you're part of it, but you many want to think about where you're getting your information.
I work in finance (part of the problem lol) so it is important for reasons beyond casual interest that I have an accurate mental model of the dynamics involved. But inflation is certainly a complex topic, and each historical moment is in many respects unique.
As you have pointed out, inflation can be caused by disruptions to the supply/production of key goods or inputs. All I'm saying is that government policy can be (and almost always is in the outlier cases like Argentina, Venezuela, Zimbabwe, Turkey et al) a cause of those disruptions. Monetary policy in the major developed economies is focused on a special case of "supply disruption" when the economy is operating at maximum capacity, observable by low unemployment rates, but continues to be stimulated by injections of new money - either bank lending directly to consumers & businesses, or large government fiscal deficits as was the case in 2020-22. (QE is an asset swap and affects the maturity of investment portfolios and thereby the demand for investment assets, but not directly consumer prices, in contrast to what many expected in the 2010s)
When you have something like climate change, pandemic, war, or an Arab oil embargo structurally raising the costs of many critical inputs across the board, the government basically faces the choice to let the hit fall more narrowly on the main users/consumers of those products, with some knock-on effects to broader economic activity, or inject more money into the system to maintain employment while lowering average living standards (spreading the pain) via inflation and falling real wages. Stimulus also enables the government to prioritize projects or groups to receive first call on newly-printed money, and is thus a kind of rationing system amidst scarcity (relevant especially in cases of war). There is an honest debate to be had about the appropriate balance between these differing approaches at any given historical moment. What happened in 2020-21 is that governments (especially the US) kept up too much fiscal stimulus for too long and thereby ran into labor-market limits, which can't be blamed on the pandemic or the "supply chain crisis" that is still being used in some places as an excuse for poor service.
I can reveal that my household has now taken the sensible step on using sunflower oil for frying instead of the extra virgin olive oil which has shot up in price.
I'm sure putting up interest rates would make the problem go away.
Well... We had ten years of steady 2%-ish annual price rises, then the government handed out $2,000 checks to everyone, and all of a sudden everything got 20% more expensive practically overnight. The cause-effect was pretty clear. And then, the map you included shows that many countries saw inflation rates far in excess of the 7-8% typical of developed economies at the time.
A similar argument to yours applies to the 1970s, to wit that the inflation of that era was in large part caused by high oil prices rather than government fiscal or monetary policies. Likewise the "disinflation" from 1982-2020 was as much or more about globalization, offshoring, and China than anything the Fed was doing.
tldr is that while many factors besides government fiscal and monetary laxity contribute to inflation, government policies are certainly important - especially when said policies really go off the rails as in eg Venezuela or Argentina.
The next posts in this series will cover some of these points. You're right about inflation being a result of multiple causes. But you're wrong about other things.
>Well... We had ten years of steady 2%-ish annual price rises, then the government handed out $2,000 checks to everyone, and all of a sudden everything got 20% more expensive practically overnight.
Gee, do you think the pandemic may have had *something* to do with that? The month after the checks went out was the single biggest receivables to the credit card industry of all time. The next checks went mainly to back rent. This is data from the New York Fed. Those things don't contribute to inflation.
There's now reliable data that at least 1/3 of inflation was caused by corporations using the inflation excuse to hike their margins.
>especially when said policies really go off the rails as in eg Venezuela or Argentina.
Money printing is *symptom*, not a cause, of hyperinflation and usually has to do with foreign exchange rates and borrowing. Central banks don't wake up one day and decide to start "printing money" for no reason. Most money creation is through bank lending.
There's a pretty robust effort to gaslight people about these topics. Not saying you're part of it, but you many want to think about where you're getting your information.
I work in finance (part of the problem lol) so it is important for reasons beyond casual interest that I have an accurate mental model of the dynamics involved. But inflation is certainly a complex topic, and each historical moment is in many respects unique.
As you have pointed out, inflation can be caused by disruptions to the supply/production of key goods or inputs. All I'm saying is that government policy can be (and almost always is in the outlier cases like Argentina, Venezuela, Zimbabwe, Turkey et al) a cause of those disruptions. Monetary policy in the major developed economies is focused on a special case of "supply disruption" when the economy is operating at maximum capacity, observable by low unemployment rates, but continues to be stimulated by injections of new money - either bank lending directly to consumers & businesses, or large government fiscal deficits as was the case in 2020-22. (QE is an asset swap and affects the maturity of investment portfolios and thereby the demand for investment assets, but not directly consumer prices, in contrast to what many expected in the 2010s)
When you have something like climate change, pandemic, war, or an Arab oil embargo structurally raising the costs of many critical inputs across the board, the government basically faces the choice to let the hit fall more narrowly on the main users/consumers of those products, with some knock-on effects to broader economic activity, or inject more money into the system to maintain employment while lowering average living standards (spreading the pain) via inflation and falling real wages. Stimulus also enables the government to prioritize projects or groups to receive first call on newly-printed money, and is thus a kind of rationing system amidst scarcity (relevant especially in cases of war). There is an honest debate to be had about the appropriate balance between these differing approaches at any given historical moment. What happened in 2020-21 is that governments (especially the US) kept up too much fiscal stimulus for too long and thereby ran into labor-market limits, which can't be blamed on the pandemic or the "supply chain crisis" that is still being used in some places as an excuse for poor service.