Some investors are betting on inflation to follow the spike in the money supply in 2020. While this is possible, the money supply has been increasing for more than a decade but inflation has fallen consistently over the same time period.
The UK data highlights a strong positive correlation between the BOE’s balance sheet, money supply, and inflation between 1947 and 1995. But thereafter, the relationships broke down. Money supply and inflation still moved in tandem, but the central bank activity seemed largely irrelevant
Further Thoughts
Similar analysis on the eurozone reflects the same trend: Central bank money printing is largely irrelevant to money supply and inflation.
Given their typical mandate to create moderate inflation, the all-powerful central banks seem quite powerless. Or they are simply fighting forces they cannot overcome: namely, the negative demographics and negative productivity growth that contribute to low economic growth.
Should investors worry about the mass money printing by central banks? Certainly. It has distorted financial markets and inflated prices across asset classes. But perhaps this simply leads to lower future returns rather than higher inflation.
CFA Institute
"Myth-Busting: Money Printing Must Create Inflation | CFA Institute Enterprising Investor"
Myth-Busting: Money Printing Must Create Inflation, By Nicolas Rabener
14 comments:
What is you peoples obsession with “myth!”?
It uses fewer characters than 'legend'
Saga-busting separates the men from the boys (and women from the girls)...
Neil myths are useful or valuable teaching stories in literature…
Why would you want to “bust” them?
Economists want to be viewed as scientists?
We don’t have myths in Science.. whether busted or not busted…
Google 'science myths'... 173 million results...
Money printing... 6 billion 160 million results...
See this excerpt:
“ It has distorted financial markets and inflated prices across asset classes. But perhaps this simply leads to lower future returns rather than higher inflation.”
He has 3 things going on there… he’s got “prices” he’s got “returns” and he’s got “inflation” …
When to me it appears he is talking about the same thing..,
He's talking about related concepts.
Taken in context, he's expressing uncertainty. "When I squeeze this balloon, this part may bulge out, but sometimes this other part over here may bulge out."
PV = mRT
Wrong. It's...
PV=nRT
Yes, you got the number of variables right (4, and "R" is a constant), but the symbol for moles is "n," not "m."
Also, I hate the phrase "negative demographics." What negative demographics? Before I finish typing this bloody sentence,the world's population will surpass 7.754 billion. Freakin' ants!
https://durhamcollege.ca/wp-content/uploads/Thermodynamics-Basic-Concepts.pdf
“ If you use this value of R, then technically the formula should be written as pV = mRT, where m represents the mass of air in kg”
Engineers use mass I think the physicists use moles….
Chemists use moles; moles use their nose.
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