Money Supply, Inflation, and Price Levels

[Deleted]

Investopedia article 02/07/22 states "Since 2000 relationships between money supply, inflation, and price levels have become unstable, reducing their reliability as a guide for monetary policy." 

Note: The BB website does not permit me to post links and has not for awhile.

[johnsmith]

Jeff Snider (who used to work at Alhambra Investments, now doing his own thing)

Also famous for his EuroDollar University - www.eurodollar.university/

has been talking about why this relationship hasn't been working; I think he basically says that the money within the goods/services economy didn't increase; it increased in the financial industry/banks.

so Asset prices went up (not goods/services therefore no inflation).

His take on the current, 2022 inflation is that it's a supply shock related to covid/pandemic related labor shortages, shutdowns and people falling ill. With extremely efficient supply chains, there is no room for problems, and when a problem occurs, it cascades through the system (auto industry, Just in time production etc). Again not really related to Money Supply.

[steadyeddy]

So, the Fed is using a hammer when a screwdriver might be the tool needed?

[steelpony10]

        Hardly anyone mentions the stock market was considered “overvalued” by about 1/3 prior to this swan dive. VTI and VOO are in the fairly valued area now.

         Nothing moves until there’s good news on inflation. Maybe fairly valued means this is it until a new leg up in markets starts usually about 2-3 years after the FED declares victory. You can’t disregard the other world events either.

         So many moving parts. That’s why I stick to income investing. Waiting isn’t in the cards as a retiree any longer. There’s nothing after this. Lol.

[ECE Prof]

Oct 4, 2022 20:32:39 GMT steadyeddy said:

So, the Fed is using a hammer when a screwdriver might be the tool needed?

This is what a lot of people are saying this week, including the UN. UN is worried about a global recession, and the suffering of many countries will get worse. So, UN wants all central banks to go easy on the interest rate hikes. The UK's pension fund solvency was in trouble and went broke last week. Also, Truss wanted to cut the taxes without paying for it. So, UK has to turn clock the clock back. That was the fiasco that many people started paying attention to the hammer. Perhaps, the Wall Street is making the same point in the last two days.

Market Wrap: Markets Seem Hopeful the Fed Will Temper Rate Increases That Crushed Prices.

Dow Jones Jumps Again On Fed Hopes.

The Federal Reserve's chance of a policy error 'has increased': JPMorgan.

[Chahta]

The UN should butt out. They are beggars that get paid by this country. You all can’t say inflation is global in one breath then say we are causing a recession in another. It is what it is. We either control US (the Golden Goose) or inflation will devour us. To say crazy spending has no part in causing inflation is ignorant. Sure Covid hit and there are supply chain issues, but when we allow energy to become a political issue that should explain a lot. Gas is still over $6 in CA. Why wouldn’t people need higher wages to live their golden life? We know what each tool (hammer and screw driver) is used for and they are being used correctly on us.

[johnsmith]

oil/gas is a natural resource that makes the world go around.
It's also balanced, production is pretty equal to demand.

The west by implementing sanctions on Russia, Iran, Venezuela (all major producers of Oil/Gas), have over time caused both production to fall and reduced supply to the world markets, and increased prices. So a self-inflicted wound.

To counter this self-inflicted wound, the Fed has stepped in to raise interest rates, which in turn raises the value of the USD (as CAPITAL sells all other currency and moves to USD. A strong dollar reduces inflation in the US as USA imports most manufactured goods and a bunch of energy) This causes worsening inflation in all other countries and hurts all import dependent countries, especially where food, energy are the biggest imports. Can't live without food and energy.

So the UN is correct when it points it out.

PS: The UN was created by the Allies (USA & friends).

Once while walking around, a person was ranting about the UN being in NYC; they didn't know that the UN was given land to build it's buildings and that many US cities tried to get the UN to situate there. Americans hate on the UN and forget it's history.
en.wikipedia.org/wiki/History_of_the_United_Nations

[johntaylor]

Yep, spasms of idealism after WW I and WW II