Hyperinflation – is it coming?
“Inflation is anywhere and everywhere a monetary phenomenon.”
What Milton Friedman meant (and proved) by this is that 1) increases the money supply are guaranteed to cause price inflation over the medium to long term AND 2) price inflation comes from nowhere else besides increases in the money supply.
Since March of 2020, the money supply has increased by about 34%. That would limit the upside of inflation to 34%. There are a lot of reasons why that is a bad thing, from the predictability of prices that are necessary for a stable economy to the downsides inherent in a hands on, centrally planned approach to banking (the information asymmetry in the financial sector is much different than the rest of the economy, but thats a separate conversation). But its nowhere near meeting the definition of truly awful hyperinflation.
If you look at the monetary regimes that lead to hyeprinflation (wiemar Germany, Venezuela, Zimbabwe and like dozens of African countries) they’re inflating the money supply at this rate on a monthly basis. Their politicians essentially become addicted. And while you hear rhetoric from the AOCs out there about MMT like its the direct from the mouth of Mugabe, luckily that is very far away from those in charge. The Fed is designed quite well to keep politicians who don’t know what the fuck they’re talking about away. That same structure causes people to shout “ELITISM!” but in this case, its a very good thing that these positions can only be achieved by literally the very top echelon of academic economists. If elections could significantly sway Fed policy like they do in many countries we’d be much worse off.
There is more going on here. Various measures of monetary supply change the way new money enters the economy – the fed only directly controls M0, and can control M1-4 less so each step via regulations. The money supply expanded significantly after 08, but the inflation wasn’t there (at least through 2019). Thats because the fed at the same time changed incentives so that banks would hold most of the money as reserves and it didn’t go out into the broader economy. The goal was to maintain liquitdy, not expand the economy. Also, inflation is dependent on the velocity of money. So if they money supply rises, and people cut transactions by the same amount (as happened early during COVID) inflation won’t happen. But over Milton’s long run, the money eventually makes it into the economy and the price level rises.
For those libertarians out there who are End the Fed/Gold standard people (thats most of you), I highly encourage you do serious research (ie not youtube, go audit a 400 level monetary economics class at a state university for like $300) on the Fed and what it does. Get past the Rothschild conspiracies and “muh private organization” and it becomes clear that the Fed is just about the most libertarian thing about the USFG.
Unpopular opinion I know.
Article from r/Libertarian: For a Free Society