Wouldn't the liquidity trap mitigate part of this?willthrill81 wrote: ↑Fri Oct 15, 2021 8:32 pm I thought that it might be worthwhile to update this thread.
The M3 money supply increased by 11% since Oct., 2020, as seen below.
The velocity of money initially increased a bit but appears to have largely stabilized. It is currently under 2% higher than its low from Q2 of 2020.
All else being equal, an increased money supply with a stable velocity of money should result in meaningful inflation. And that's exactly what we've seen. The annualized inflation rate as measured by CPI has increased from 1.2% in Oct. of 2020 to 5.4% in Sep. of 2021.
Now, I get the stimulus and enhanced unemployment having an impact on inflation as that is money that flows to consumers most likely to spend. But I struggle with printing money as a cause of inflation by itself.
https://www.stlouisfed.org/on-the-econo ... lation-low
https://web.mit.edu/krugman/www/trioshrt.html
However, it does look like consumers are starting to drain their savings:
https://fred.stlouisfed.org/series/TSDABSHNO