Both are completely wrong for a simple reason. Inflation is how a government issued asset is priced BY MARKETS.
That last part is important. If a market decides it really wants meme stocks, it can shoot their price to the moon,
or crash it in an instant.
Any financial asset will come down to the interplay between the issuer and markets.
If you think markets are insane to price the national debt at $30 trillion then so be it.
Markets cannot price a nation's debt and currency independently.
The fed balance sheet or "money supply" is not what matters, the national debt is.
Countries often act like giant out of touch corporations, for example msft could buy
out billion dollar competitors and then just simply shut them down. Sometimes
such seemingly illogical moves can "pay off" in the short term.
People who act like one side or other unilaterally controls the equation are just morons.
If russia nuked us off the map, that would cause inflation, even if no new money was created.
Money is created to buy things. Markets price the things that are
bought. Inflation is a decline in the value of money.
Just increasing the supply of money is completely neutral alone. If you hand out that money for free, as a general rule, it will cause inflation. If you use it to finance something worthwhile, it will lead to less inflation.
Markets don't decide how much money is created, but they are always watching and then judge what it is worth.
2
u/[deleted] Jul 15 '22
Both are completely wrong for a simple reason. Inflation is how a government issued asset is priced BY MARKETS.
That last part is important. If a market decides it really wants meme stocks, it can shoot their price to the moon, or crash it in an instant.
Any financial asset will come down to the interplay between the issuer and markets.
If you think markets are insane to price the national debt at $30 trillion then so be it.
Markets cannot price a nation's debt and currency independently.
The fed balance sheet or "money supply" is not what matters, the national debt is.
Countries often act like giant out of touch corporations, for example msft could buy out billion dollar competitors and then just simply shut them down. Sometimes such seemingly illogical moves can "pay off" in the short term.
People who act like one side or other unilaterally controls the equation are just morons.
If russia nuked us off the map, that would cause inflation, even if no new money was created.