{"id":52876,"date":"2020-04-29T18:44:18","date_gmt":"2020-04-29T23:44:18","guid":{"rendered":"https:\/\/olduvai.ca\/?p=52876"},"modified":"2020-04-29T18:44:23","modified_gmt":"2020-04-29T23:44:23","slug":"inflation-or-deflation-collapse-in-demand-trumps-supply-shocks","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=52876","title":{"rendered":"Inflation or Deflation? Collapse in Demand Trumps Supply Shocks"},"content":{"rendered":"\n<h3 class=\"wp-block-heading\"><a href=\"https:\/\/www.thestreet.com\/mishtalk\/economics\/inflation-or-deflation-collapse-in-demand-trumps-supply-shocks\">Inflation or Deflation? Collapse in Demand Trumps Supply Shocks<\/a><\/h3>\n\n\n\n<figure class=\"wp-block-image is-resized\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/imageproxy.themaven.net\/https%3A%2F%2Fimages.saymedia-content.com%2F.image%2FMTcyMjAwNTYwMzg3MTcxNTQw%2Fillustration-chad-crowe---inflation.png\" alt=\"\" width=\"448\" height=\"344\" title=\"\"\/><\/figure>\n\n\n\n<p>The inflationists are coming out of the woodwork, but they are wrong.<\/p>\n\n\n\n<p><a href=\"https:\/\/www.wsj.com\/articles\/get-ready-for-the-return-of-inflation-11587659836\">Get Ready for the Return of Inflation<\/a>, says&nbsp;Tim Congdon, in a&nbsp;Wall Street Journal op-ed.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p>The economists Milton Friedman and Anna Jacobson Schwartz demonstrated in \u201cA Monetary History of the United States\u201d that a collapse in the quantity of money was the main cause of the Great Depression. Hoping to avoid a repeat, the Federal Reserve in recent weeks has poured money into the economy at the fastest rate in the past 200 years. Unfortunately, this overreaction could turn out just as poorly; history suggests the U.S. will soon see an inflation boom.<br><br>Friedman and Schwartz used a broad definition of the quantity of money that included all bank deposits, and found that U.S. money stock shrank by 38% between October 1929 and April 1933. Some prominent economists\u2014including Princeton\u2019s Paul Krugman and Columbia\u2019s Joseph Stiglitz\u2014claim that money growth no longer matters much, but they\u2019re wrong. After all, the 2007-09 recession showed that the ever-changing fortunes of the banking system have a significant effect on demand, output and employment. From 2010-18, growth rates of the quantity of money and nominal gross domestic product were virtually identical at 4% a year.<\/p><p>Policy makers have repeatedly called the battle against the novel coronavirus a war. As in wartime, federal expenditures are rising sharply while tax revenues are being hit by the lockdown. Both World War I and World War II\u2014and, indeed, the Vietnam War\u2014were followed by nasty bouts of inflation. If that happens again, policy makers today being cheered for their swift, decisive action will instead have to answer for their grave lack of foresight.<\/p><\/blockquote>\n\n\n\n<p><strong>Inflation View is Wrong<\/strong><\/p>\n\n\n\n<p>The inflation view espoused above is widely held. Some even call for hyperinflation.&nbsp;<\/p>\n\n\n\n<p>However, the collapse in demand, dwarfs supply shocks and monetary printing.<\/p>\n\n\n\n<p>\u2026click on the above link to read the rest of the article\u2026<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Inflation or Deflation? Collapse in Demand Trumps Supply Shocks The inflationists are coming out of the woodwork, but they are wrong. Get Ready for the Return of Inflation, says&nbsp;Tim Congdon, in a&nbsp;Wall Street Journal op-ed. The economists Milton Friedman and Anna Jacobson Schwartz demonstrated in \u201cA Monetary History of the United States\u201d that a collapse [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[202,29563,426,538,3650],"class_list":["post-52876","post","type-post","status-publish","format-standard","hentry","category-economics","tag-deflation","tag-demand-vs-supply","tag-inflation","tag-money-printing","tag-us-federal-reserve"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/52876","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=52876"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/52876\/revisions"}],"predecessor-version":[{"id":52877,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/52876\/revisions\/52877"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=52876"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=52876"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=52876"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}