Does printing money cause inflation?
Youtube videos and other sources allege that 40% of all US money was created in the past year. What they’re really suggesting is that the US government is going to kick off high inflation and increase the cost of everything. And they’re doing this at a time when the cost of everything is coincidentally going up.
This is a very clear example of a disinfo trick we call “Fake Cause and Effect.”
Why are prices going up now (or why do people expect prices will go up)?
The pandemic disrupted supply chains. This created some shortages initially (remember when no one could find toilet paper?) and others appeared in the long term. It also created new kinds of demand.
What kind of shortages and increases in demand are currently happening?
- Lumber
- Housing
- Trucking
- Shipping containers
- Paper products and household goods
- Gasoline
- Electronics and cars (semiconductor chips)
- Plastics and packaging
- Chicken
- Pet food
- Stimulus checks
- And so on
What kind of shortages and increases in demand are currently happening?
It traces back to two root causes: COVID-19 and unforeseen events (weather, ransomware, shortages in stuff used to transport stuff) disrupting supply chains.
Bottom line
Did increasing the money supply contribute to some inflation? Yeah, probably. People have more money to spend and they want to spend it. But the increases in prices we’re seeing and will see have more to do with shortages than with printing money.
References
- Business Insider: Can’t find chicken wings, diapers, or a new car? Here’s a list of all the shortages hitting the reopening economy.
- Business Insider: The US is facing a supply-chain crisis as 21 cargo ships float off the coast of LA waiting to dock
- USA Today: Before the pandemic ketchup squeeze: A year of COVID-19 product shortages and the items we struggled to find
- The Washington Post: Economic tremors hit White House at crucial moment for Biden policy agenda
- Also this chart from the above Washington Post article: Twitter
- The Washington Post: EXPLAINER: Why are fears of high inflation getting worse?
- The Washington Post: Inflation is up. The stock market is down. Here’s why you shouldn’t panic.
- Wall Street Journal: Commodities Boost Economic Recoveries, Mirroring Aftermath of Financial Crisis
- Wall Street Journal: The U.S. Economy Is Back. Businesses Aren’t Ready.
- Wall Street Journal: U.S. Shoppers Continued Stimulus-Fueled Spending in April
- Bloomberg: Gasoline Pinch to Grind on for Weeks With Truck Shortage
- WUSA9: VERIFY: We’re running out of wood. Here’s why there is a lumber shortage
See an error in our work? Please let us know and include the source of your info. We’ll update or correct as appropriate.