I'm a software engineer, so not an expert in macroeconomics obviously, but here are some highlights that I think we are missing to consider when we think inflation is coming:
- The USD is the reserve currency of the world, printing money does not only affect the USA but the entire world to some degree.
- Money printing is not just happening in the USD, but rather, the pandemic was a world event and many nations are "printing money".
- The USA Federal Reserve is not, strictly speaking, printing money. It is way more complex than just money printing. From what I understand, is more efficient to "print money" by increasing the money multiplier, meaning, the Fed ask banks to lend more since lending money multiplies the money faster than printing. Therefore, with QE (Quantitative Easing), the Fed buys debt from banks giving them liquidity for them to lend more money into the system. However, given that we are in an economic recession (temporary perhaps but recession nonetheless), banks are not really lending at the rates the Fed wants. In order to fix this, the usual approach is to lower even further the rates, but we are already at near zero so there is not much to do there either; which is what I understand is referred to as a Liquidity Trap.
- A weak dollar (and strong Yuan, etc) is bad for the exports of other countries, so they will be incentivized to devalue their currencies.
Anyways, this is not to say that inflation won't happen, but rather than a simplistic point of view "printer goes brrrr, inflation will happen" is probably not correct.
I personally find it hard to believe that hyper-inflation will happen, but I also recognize that I'm not certain of this.
Right, but actually deflation (the opposite of inflation) could be so much more worse than inflation. Inflation we know how to fix, the Fed increases the interest rates.
However, a Deflationary Spiral, is way worse in the sense that it makes everyone scared of spending money, prices next year will go down so why buy anything this year? Getting out of deflation is way harder from what I understand.
So yes, I agree with you that I just described a perfect storm (credit to people like Steven Van Metre, etc), but the argument here is that the storm might not be inflation but rather deflation.
What I can agree on is that the end is not pretty either way.
I'm a software engineer, so not an expert in macroeconomics obviously, but here are some highlights that I think we are missing to consider when we think inflation is coming:
- The USD is the reserve currency of the world, printing money does not only affect the USA but the entire world to some degree.
- Money printing is not just happening in the USD, but rather, the pandemic was a world event and many nations are "printing money".
- The USA Federal Reserve is not, strictly speaking, printing money. It is way more complex than just money printing. From what I understand, is more efficient to "print money" by increasing the money multiplier, meaning, the Fed ask banks to lend more since lending money multiplies the money faster than printing. Therefore, with QE (Quantitative Easing), the Fed buys debt from banks giving them liquidity for them to lend more money into the system. However, given that we are in an economic recession (temporary perhaps but recession nonetheless), banks are not really lending at the rates the Fed wants. In order to fix this, the usual approach is to lower even further the rates, but we are already at near zero so there is not much to do there either; which is what I understand is referred to as a Liquidity Trap.
- A weak dollar (and strong Yuan, etc) is bad for the exports of other countries, so they will be incentivized to devalue their currencies.
Anyways, this is not to say that inflation won't happen, but rather than a simplistic point of view "printer goes brrrr, inflation will happen" is probably not correct.
I personally find it hard to believe that hyper-inflation will happen, but I also recognize that I'm not certain of this.