The overall takeaway is that there is no free lunch.<p>Many countries in Latin America went that way. Namely Venezuela and more recently Argentina. Chile could be the next in the way.<p>When politicians say that 3 trillion dollar bills cost zero they should pay a political cost for this absolutely dangerous lie. Unfortunately they get away with this insanity. The idea that you can take 3 trillion dollars in goods and services without producing anything in return without impact is ridiculous and frankly childish. It's as if these people lost touch with reality and forgot that it takes time, effort and resources to produce anything of value.
I'm an old Argentinan and lived through many inflation and hyperinflation cycles already.<p>The cause is trivial: Governments are given the 'infinite money' machine and they abuse it. They abuse it like if they were primary school kids, thinking printing money to pay for stuff is a valid solution, its unbelievable but they truly did this for decades.<p>Then you think, if this is true, do they print money to pay themselves and become millionaires? answer is incredible: Yes, they do exactly that, and if you visit the house of any politician in Venezuela or Argentina, you see that they live like Silicon Valley Billionaries, next to the slums they have created. If they need money for anything they just add it in the budget and at the end of they year they just print it! I know it seems crazy but they do exactly this, since 1970. The results are obvious.<p>In our case is a little more sinister because its not enough to print money, they have to make all other money illegal, or else people would just stop using the fake currency. TLDR: They did exactly that, any currency except the one they print is illegal.<p>USA did this in the pandemic, and now you have the consequences. You can't print money from nothing, its that simple.
I'm reminded of this article from 2020 [1]:<p>><i>The United States printed more money in June than in the first two centuries after its founding. Last month the U.S. budget deficit — $864 billion — was larger than the total debt incurred from 1776 through the end of 1979.</i><p>and this is a good graph of our money supply (M1) [2]<p>The inflation is here to stay. And it will only get worse. Fed's recent 25-basis point rate hike won't do anything to curtail the inflation.<p>[1] <a href="https://blog.panteracapital.com/two-centuries-of-debt-in-one-month-pantera-blockchain-letter-july-2020-f876b43448a2?gi=257283f71639" rel="nofollow">https://blog.panteracapital.com/two-centuries-of-debt-in-one...</a><p>[2] <a href="https://fred.stlouisfed.org/series/M1SL" rel="nofollow">https://fred.stlouisfed.org/series/M1SL</a>
Required reading: "Shock Doctrine" - the repeated disastrous implementation of Friedman's ideas, and the Chicago school of economics / the "Chicago Boys," often to stop inflation. See also the "Berkeley Mafia."
Another effect of inflation is that people are forced to invest and take on risk, in order to not lose their savings. I think this has a major effect on workforce productivity and mental health. Everyone has to watch markets and worry about their savings. Active investing is like having an extra job.<p>I don't think that inflation can be 'cured' in the current monetary system. Like he said, there is a cure, but there is no will. It is impossible for a society to resist the temptation of creating more money.
the elephant in the room (that is really overlooked in these discussions) is that a lot of the current inflation is not coming from money policies but rather from supply side issues. E.g. gas and oil due to the ukraine war (also wheat, nickel etc.), less microchips from china due to its handling of covid (lockdowns) and the change in consumerism due to covid which resulted in more demand for things like bicycles, office hardware for home office, baking machines etc. etc.<p>So why is this supply side aspect often overlooked? Not so much because it is not known but rather because a lot of crisis handling in the last decades came through to the central banks and thus monetary policy. However, this can only be one aspect. We need more classical invention from governments wrt taxes, subventions etc. So, basically, what nearly every economic problem is about: inequality and reallocation of resources.
Friedman mentions Germany post-WWI as an example of extreme inflation. The German hyperinflation is often cited as a contributing cause for the rise of Hitler. However, Germany was well into <i>deflation</i>, to the tune of -9%, by the time that Hitler became Chancellor. The German hyperinflation turned out to be... transitory, lasting just 2 years from 1921 to 1923:<p><a href="https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_Republic" rel="nofollow">https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_R...</a><p>Credit for ending the hyperinflation is usually given to the introduction of the "Rentenmark," a currency "backed" by land.<p><a href="https://en.wikipedia.org/wiki/Rentenmark" rel="nofollow">https://en.wikipedia.org/wiki/Rentenmark</a><p>Yet this idea has not been challenged to the extent that it should be. How does the introduction of another currency scheme cure inflation? And in such a dramatic manner? Is it possible that inflation, rather than being a monetary phenomenon as Friedman famously asserted, is actually a psychological phenomenon?
As an actual contrarian, I'm pretty certain the Fed is going to slam on the brakes hard in the next coming few years and we will switch rapidly to deflation/depression.<p>The wage increases are going to cause exactly this kind of panic and the Fed will be forced to act. They're reacting somewhat slowly right now due to the pandemic/war. As soon as we have those kinds of stresses in the rear view window though they're going to start to hammer on the brakes.<p>Be careful what you all wish for. I think its going to eventually be worse than 2008.
No inflation - strictly unchanging amount of money in circulation - means your income would be going up <i>and down</i> depending to economical situation. Would you accept that?
At 11:00 there is a chart of the U.S. money supply (with CPI). Here is the current money supply (M2) chart produced by the Fed.<p><a href="https://fred.stlouisfed.org/series/M2SL" rel="nofollow">https://fred.stlouisfed.org/series/M2SL</a>
Inflation is not good, obviously.<p>The cure in the past was to basically destroy some of the jobs so that people won't be in a position to bargain for a higher pay.<p>There is an ongoing argument if the cure is worse than the disease.
7% inflation is orders of magnitute better than 40% unemployment. Specially if you are the US and everyone is begging to buy your freshly printed dollars.
As far as supply of parts relates to inflationary tendencies and in Intel's case that lack of Chip Making capacity is directly related to Intel's decision to pursue Share Buybacks instead of investing in new Chip Fab Capacity and Chip Fab Process Node R&D. So the entire semiconductor Industry needs to be analyzed for Proper Investment in Chip Fabrication capacity relative to Share Buybacks and how that affected the current Chip Supply-Chain/Inflation rates. So in circa 2014 Intel Mothballed its Fab 42 Chip Fab at the Building Shell stage sans any of the equipment purchases which Intel deferred to pursue a share buyback strategy. So this corporate policy needs to be accounted for as a policy that has exacerbated the inflationary tendencies of many products' supply downstream of Intel/Other semiconductor suppliers.<p>Now the Pure Play Foundries(TSMC, GlobalFounderies, Others) need to be analyzed as well for any similar behavior but TSMC's in Taiwan and less beholden to a strict fiduciary requirement to Increase Shareholder value at the cost of all else(Investment towards the Future).<p>So these industries influence on the overall supply chain of consumer products is rather more leveraged now than it ever was in the past what with the supply of every new device, including Planes, Trains, and Automobiles, so dependent on the supply of Chips(Microprocessors and ancillary Devices). Look to the recent auto industry/other chip supply chain woes and that's more than just money supply related this new high inflation cycle where every product includes some form of microprocessor chip and related components like VRM(Voltage Regulator Modules) and other components without which any microprocessor will not be able to function.<p>The entire economy is rather more beholden to the chip supplies and chip production capacity issue and that of Corporate Policy in the US especially but also the rest of the world. I mentioned Intel because Intel still retains its own chip fabs while AMD has become like others a fabless semiconductor company. But AMD currently has just announced a second round of share buybacks and how will that affect AMD's investments in its future is yet to be seen. But this entire process of share buybacks at the cost of investments in the future needs to be examined and from a perspective of how that's helped exacerbate the current round of inflationary tendencies via the supply of a very vital product in the world's economy the Microprocessor/Ancillary components.
Unrelated: I just want to mention the clarity of enunciation of people of this era. They spoke with this wonderful crystalline voice that is so pleasant to hear. Similar can be heard in Bell Labs demonstrations and other 1950-1980 clips. I think part of it is the audio processing and low-pass filtering, but I think the accent and our discipline of the language has changed dramatically. In America, many kids today cannot go longer in a sentence without uttering 'like' and 'um'.