> will any of this impact inflation? Probably not, as Philips Curve fueled infla...

tomatocracy · on April 10, 2020

It depends how you measure inflation. Over the past decade or so we've seen what I've heard described as "biflation" - imported deflation in the prices of many goods alongside pretty high rates of inflation in some services, goods and assets (like company shares or real estate in some markets). Traditional measures of consumer price inflation are pretty heavily skewed towards goods and within those slightly skewed towards goods which come with imported deflation so when that all gets averaged out it shows slightly below target inflation but the headline numbers really don't tell you as much as they used to.

Whether this continues I have no idea but it's worth thinking about the components of "inflation" and what is and isn't included when considering its impact on the economy.

tarsinge · on April 10, 2020

That's a very good point, inflation in real estate is easy to grasp.

marvin · on April 10, 2020

Won't the M2 measure of the money supply increase by some 40% as a consequence of the current stimulus and bailout packages? Hard to see that this won't cause some inflation.

remedialhedge · on April 10, 2020

No. Look at the papers about QE from the financial crisis. Increases in bank reserves had very little effect on consumer price inflation. Even with large scale monetary intervention, we haven't seen significant inflation in any developed economy in decades. There are many reasons for this (decreased wage-push inflation from weaker labor unions, wealth inequality, trade, structural and demographic factors, etc).

Someone else on this post commented on the potential for a bifurcated inflation system, where some goods and services (and assets) are sensitive to local currency, inequality, and labor market conditions and others (e.g. imported goods) are more sensitive to other factors. This is a reasonable hypothesis but last I checked the evidence is not all there yet.