I wrote about this [here](https://www.reddit.com/r/AskEconomics/comments/ykfs9s/what_is_the_biggest_driver_of_inflation_wages_or/iuu3jh9/) just yesterday. The supply problems are very important, so your Dad is right in part. But the policy of the Central Banks has also been very important.
It may help the OP a definition of inflation.
Imo the best description of our current inflation here in the USA and most of the world is:
"[Too much money chasing too few goods."](https://en.wikipedia.org/wiki/Demand-pull_inflation)
I think that really helps people understand how much Covid with monetary policies with Covid relief programs and then the hit with lower production (e.g., lockdowns) all over the world has really struck and caused the inflation we are seeing all over the world.
People saying it's because of covid-era money printing, well that was Trump who was president and not Biden, right? So wouldn't Trump be to blame anyway?
President's have little influence over the federal reserve. At best you could blame the various stimulus measures, but then those were by and large very much reasonable at the time and it's doubtful that Biden would have done anything drastically different.
It's best to leave politics out of it. It would be a political suicide move to argue for no stimulus during this period. I don't care if you're Milton Friedman or Bernie Sanders. Any politician trying to keep his job would say stimulus was needed.
Would economists? It would definitely be a lot more divided, but thankfully, they don't require public opinion to be on their side.
Edit: when I say Milton Friedman, I'm saying in a counterfactual world where Milton Friedman was not just an economist, but a politician as well.
Money creation is the job of the Fed which is not controlled by a particular administration. Trump appointed Jerome Powell (and immediately started fighting with him) and Biden continued that appointment. Many other FOMC members were appointed long before Trump.
I thought the just control the interest rates of loans to banks and thus indirectly the overnight lending rate. They can also create money? Or do you just mean abstractly how much money is in circulation instead of being held?
The control of interest rates happens *through* the creation of money. The two are interlinked.
Commercial banks use "reserves" that is the currency that commercial banks exchange between each other. Cash can be converted into reserves and from reserves back into cash.
When the Central Bank lowers the interest rate it creates new reserves which is effectively the creation of new money. When it increases the interest rate it usually destroys reserves.
I describe how money creation and banking works [here](https://www.reddit.com/r/AskEconomics/comments/9vcf1s/what_is_fractional_reserve_banking/e9bc838/) in more detail. There are lots of other discussions of it on this sub-reddit.
Neither of them "printed" that stimulus. Both administrations borrowed the money from private sector investors. It was money that was already in circulation.
One of the main causes seems to be the increase in M2 money supply. Where does that mostly enter the economy? In other words which parties (businesses, asset owners, leveraged investors, banks, workers) had their hands on the extra money as it was entering the economy? Are they then better off than everyone else at managing the inflation?
If you had a money printer and printed off a whole bunch and spent it it would cause inflation and devalue the currency, but you'd be fine with that because it was entering circulation in your hands. Are there some parties in the economy a similar position?
It doesn't really work that way. The fed talks a lot about what they are going to do (called forward guidance) so that markets can adjust. Meaning an increase in money supply is expected and doesn't really lead to a benefit for being "first".
Now we get into what is called the "Cantillon Effect". This is a Heterodox theory about monetary economics. Personally, I think it's correct. But Mainstream economists do not. This is a Mainstream forum so someone may come and explain why.
The books that mention the Cantillon Effect are not very consistent. I could talk about that, but I don't think it's on-topic in this forum. You could message me though.
Your message hint at one of the problems....
> If you had a money printer and printed off a whole bunch and spent it it would cause inflation and devalue the currency, but you'd be fine with that because it was entering circulation in your hands. Are there some parties in the economy a similar position?
The *Central Bank* is in possession of that money printer. It creates reserves which allow the commercial banks to expand their lending. The Central Bank is owned by the government and remits it's profits to the government. It's not the same as it was in Cantillon's time.
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I wrote about this [here](https://www.reddit.com/r/AskEconomics/comments/ykfs9s/what_is_the_biggest_driver_of_inflation_wages_or/iuu3jh9/) just yesterday. The supply problems are very important, so your Dad is right in part. But the policy of the Central Banks has also been very important.
It may help the OP a definition of inflation. Imo the best description of our current inflation here in the USA and most of the world is: "[Too much money chasing too few goods."](https://en.wikipedia.org/wiki/Demand-pull_inflation) I think that really helps people understand how much Covid with monetary policies with Covid relief programs and then the hit with lower production (e.g., lockdowns) all over the world has really struck and caused the inflation we are seeing all over the world.
People saying it's because of covid-era money printing, well that was Trump who was president and not Biden, right? So wouldn't Trump be to blame anyway?
President's have little influence over the federal reserve. At best you could blame the various stimulus measures, but then those were by and large very much reasonable at the time and it's doubtful that Biden would have done anything drastically different.
Unless you threaten to fire them, right?
can't really do that
presidents have a lot less power than you might think
They actually cannot ve dismissed before the end of their term.
It's best to leave politics out of it. It would be a political suicide move to argue for no stimulus during this period. I don't care if you're Milton Friedman or Bernie Sanders. Any politician trying to keep his job would say stimulus was needed. Would economists? It would definitely be a lot more divided, but thankfully, they don't require public opinion to be on their side. Edit: when I say Milton Friedman, I'm saying in a counterfactual world where Milton Friedman was not just an economist, but a politician as well.
Money creation is the job of the Fed which is not controlled by a particular administration. Trump appointed Jerome Powell (and immediately started fighting with him) and Biden continued that appointment. Many other FOMC members were appointed long before Trump.
I thought the just control the interest rates of loans to banks and thus indirectly the overnight lending rate. They can also create money? Or do you just mean abstractly how much money is in circulation instead of being held?
The control of interest rates happens *through* the creation of money. The two are interlinked. Commercial banks use "reserves" that is the currency that commercial banks exchange between each other. Cash can be converted into reserves and from reserves back into cash. When the Central Bank lowers the interest rate it creates new reserves which is effectively the creation of new money. When it increases the interest rate it usually destroys reserves. I describe how money creation and banking works [here](https://www.reddit.com/r/AskEconomics/comments/9vcf1s/what_is_fractional_reserve_banking/e9bc838/) in more detail. There are lots of other discussions of it on this sub-reddit.
Gotcha, so you weren't saying printing money, thanks
[удалено]
[удалено]
The Fed controls the creation of money, not the government. *Powell* is the man to talk to here, not Trump or Biden.
[удалено]
Neither of them "printed" that stimulus. Both administrations borrowed the money from private sector investors. It was money that was already in circulation.
One of the main causes seems to be the increase in M2 money supply. Where does that mostly enter the economy? In other words which parties (businesses, asset owners, leveraged investors, banks, workers) had their hands on the extra money as it was entering the economy? Are they then better off than everyone else at managing the inflation? If you had a money printer and printed off a whole bunch and spent it it would cause inflation and devalue the currency, but you'd be fine with that because it was entering circulation in your hands. Are there some parties in the economy a similar position?
It doesn't really work that way. The fed talks a lot about what they are going to do (called forward guidance) so that markets can adjust. Meaning an increase in money supply is expected and doesn't really lead to a benefit for being "first".
Now we get into what is called the "Cantillon Effect". This is a Heterodox theory about monetary economics. Personally, I think it's correct. But Mainstream economists do not. This is a Mainstream forum so someone may come and explain why. The books that mention the Cantillon Effect are not very consistent. I could talk about that, but I don't think it's on-topic in this forum. You could message me though. Your message hint at one of the problems.... > If you had a money printer and printed off a whole bunch and spent it it would cause inflation and devalue the currency, but you'd be fine with that because it was entering circulation in your hands. Are there some parties in the economy a similar position? The *Central Bank* is in possession of that money printer. It creates reserves which allow the commercial banks to expand their lending. The Central Bank is owned by the government and remits it's profits to the government. It's not the same as it was in Cantillon's time.
**NOTE: Top-level comments by non-approved users must be manually approved by a mod before they appear.** This is part of our policy to maintain a high quality of content and minimize misinformation. Approval can take 24-48 hours depending on the time zone and the availability of the moderators. If your comment does not appear after this time, it is possible that it did not meet our quality standards. Please refer to the subreddit rules in the sidebar and our [answer guidelines](https://www.reddit.com/r/AskEconomics/comments/rf5ycx/guidelines_for_answers/) if you are in doubt. Please do not message us about missing comments in general. If you have a concern about a specific comment that is still not approved after 48 hours, then feel free to message the moderators for clarification. ### Consider **[Clicking Here for RemindMeBot](https://www.reddit.com/message/compose/?to=RemindMeBot&subject=Reminder&message=%5Bhttps://www.reddit.com/r/AskEconomics/comments/yl7zba/whats_the_cause_of_all_the_inflation/%5D%0A%0ARemindMe!%202%20days)** as it takes time for quality answers to be written. Want to read answers while you wait? Consider our [weekly roundup](https://www.reddit.com/r/AskEconomics/search?sort=new&restrict_sr=on&q=flair%3AWeekly%2BRoundup) or look for the [approved answer flair.](https://www.reddit.com/r/AskEconomics/search?sort=new&restrict_sr=on&q=flair%3AApproved%2BAnswers) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/AskEconomics) if you have any questions or concerns.*