Inflation is always and everywhere a monetary phenomenon

[odysseus2000]

HGV hours were reduced because of claimed safety issues:
https://vimcar.co.uk/resources/blog/hgv ... implified/

The UK soon found that these regulations were too tight and changed them:
https://vimcar.co.uk/resources/blog/hgv ... fied/#2021

But by then the damage had been done and the whole supply chain based on “just in time” was shown to be unworkable and this led to more shortages and with the shortages came price rises that people paid to guarantee supply and so the troubles of Covid that could have been addressed had HGV hours in Europe and elsewhere not been changed were not addressed and we entered the current inflationary cycle as HGV drivers saw their take home pay cut and so they quit the industry.

There is one School of thought that this is all random and is not part of a well thought out plan. That is not my experience of how governments work, but it is impossible for some to accept this as they believe governments work for the benefits of their citizens.

The effect of inflation is to reduce the huge debts that most western governments have built up. This has been a policy objective for many years and Covid provided the start of the inflation cycle and politicians then compounded the problems with the HGV regulations.
Then on top of all of this Russia invaded Ukraine after years of attempts by the Pentagon to extend Nato and this included the installation by Nato of the puppet regime of Zelenski. A leader of a country whose previous occupation was as a comedy actor.

Once this happened one had energy inflation and a massive scramble by Germany and several other countries to build as much storage as possible and then out bid other consumers for what ever natural gas was available. This all pushed up inflation and the spot prices of natural gas shot up until the point when all the available storage was filled and then the price tanked as there is a lot of natural gas outside of Russia.

Biden authorised lend lease to supply Ukraine with US weapons that, as was known from various middle East wars, are better than Russian ones, so that a small better equipped Ukrainian army was able to batter the Russians and force them back to the Crimea adding an hot war to the building tensions of cold war 2. Ukraine have no option but to keep buying on tick US weapons and this is adding defence inflation and the US makers of the weapons are making a fortune as Ukraine sinks deeper into debt.

Where all of this ends, who knows. One hopes that at some point there are peace talks, but Russia has a lot of well educated scientists who in the by and by are likely to develop weapons that are as good or better than what the US is lend leasing Ukraine adding to another arms race. The Russians were hugely out gunned by the German forces in the second war, but they soon developed better weapons and tactics and then moved west rolling through the Germans and leading to the warsaw pact era that lasted until Gorbachov in what was called Cold War 1.

It would be nice to see a States-person emerge who can calm the Russian/Ukriane situation down and prevent the other potentially explosive clash between China and Taiwan, but as of now I do not see one and we are two years from the next presidential elections in the US and who knows when leadership in Moscow and Beijing will change.

The world has gone from a low inflation relatively peaceful state to a high inflation and very dangerous state where the danger of nuclear war are enhanced and where the savings of many with fixed investments are being murdered and those able to profit from inflation are making a fortune, exactly has happened in previous inflationary spirals. The deflationary forces on innovation are struggling to compete with this Tsunami of inflation as happened in the 1930’s and a lot of wealthy folk are arguing that this is a needed and long over due correction that will re-establish the power of the central banks and governments. Already we are seeing central banks wanting to introduce their own cyber currencies and as central banks control the levers of the economy they are forcing through their agenda.
If things continue as previously we will see a flood of housing hit the market as buyers used to variable and low interest rates will try to escape from the new high rates.

At the same moment we are seeing the beginning of the AI revolution where more and more jobs are becoming machine doable. This is a new phenomenon, never seen before, but as it gains momentum many well paid jobs will vanish and this will enhance the power of States who can control what universal income levels are available and what personal wealth is acceptable. The well known and repeated mantra of:

You will own nothing and you will be happy.

Many will dispute that AI can have this effect and that the good times of the last two generations are over and hopefully I am wrong, but that is how I currently see things.

The primary defences against inflation are assets that increase in price during inflation periods and which have pricing pressure. Many have long argued that gold is such an asset, but so far they have been disappointed and cyber currencies have been creamed too. Growth equities and land generally do well during inflation, but an investor has to know what he/she is doing as growth industries have a shelf life. Once upon a time Railways were seen as a growth industry.

Regards,

[TheMotorcycleBoy]

A leader of a country whose previous occupation was as a comedy actor.

Totally and utterly off-topic. But also demonstrably a superb politician!

A lot better than Trump, Truss, Johnson....

[TheMotorcycleBoy]

Anyway I guess any answers to my original post, have been lost in the post by now.

Personally, I think the only way MFs proposal can be satisfied (for both demand and supply) is for supply stocks to result somehow in the creation of more money.

Matt

[murraypaul]

HGV hours were reduced because of claimed safety issues:

When were they reduced?

[odysseus2000]

HGV hours were reduced because of claimed safety issues:

When were they reduced?

The latest, as far as I know EU regulations were ratified in July 2020:

https://app.croneri.co.uk/feature-artic ... -now-force

Regards,

[murraypaul]

HGV hours were reduced because of claimed safety issues:

When were they reduced?

The latest, as far as I know EU regulations were ratified in July 2020:
https://app.croneri.co.uk/feature-artic ... -now-force

Those rule changes do not reduce driver hours, so how can they have the effect you are claiming?

Indeed they actually extend the situations in which driver hours can be extended.

New provisions relate to rests and breaks for journeys involving transport by ferry or rail, a new rule on driving breaks for double-manned journeys as well as a derogation allowing daily and weekly driving time to be exceeded in certain exceptional circumstances.

As a reminder, you have claimed this:

This inflation began when the working hours of hgv drivers were restricted all over the world in a simultaneous introduction of legislation to make hgv drivers work easier.

[PeterGray]

HGV hours were reduced because of claimed safety issues:

When were they reduced?

The latest, as far as I know EU regulations were ratified in July 2020:

https://app.croneri.co.uk/feature-artic ... -now-force

Regards,

Your link includes the quote -
"Arguably the most “game changing” amendments are new provisions permitting the extension of daily and weekly driving time in exceptional circumstances, in order to allow drivers to reach their employer’s operating centre or their home before taking a weekly rest period."

So the most significant change was a RELAXATION!

[odysseus2000]

Anyway I guess any answers to my original post, have been lost in the post by now.

Personally, I think the only way MFs proposal can be satisfied (for both demand and supply) is for supply stocks to result somehow in the creation of more money.

Matt

I prefer to think of inflation as "Too much money chasing too few goods."

Back in the 1970's, before China became the workshop to the world, there were always manufacturing constraints limiting supply. After China emerged as a major manufacturer these constraints became negative and we had deflation: "Too many goods chasing too little money."

The current inflation has emerged due to the throttling off, of just in time supply chains then made worse by the invasion of Ukraine and the sanctions that have flowed both ways leading to a frenzied search for more storage and alternatives to the pipe line fuels from Russia.

If the world gets out of this situation without a major war it should move the world away from fossil fuels and to modern renewable generation, but for this to happen there will have to be a lot of grid level storage. The development of compressed gas storage looks like this technology can deliver the needed storage at a lower cost and more quickly than batteries.

Regards,

[odysseus2000]

Peter Gray
Your link includes the quote -
"Arguably the most “game changing” amendments are new provisions permitting the extension of daily and weekly driving time in exceptional circumstances, in order to allow drivers to reach their employer’s operating centre or their home before taking a weekly rest period."

So the most significant change was a RELAXATION!

No, the regulations significantly cut drivers hours and reduced their pay and many quit the industry leading to shortages.

Then there were various provisions created to make things easier, but by then it was too late and inflation ripped.

Regards,

[TheMotorcycleBoy]

Anyway I guess any answers to my original post, have been lost in the post by now.

Personally, I think the only way MFs proposal can be satisfied (for both demand and supply) is for supply stocks to result somehow in the creation of more money.

Matt

I prefer to think of inflation as "Too much money chasing too few goods."

Back in the 1970's, before China became the workshop to the world, there were always manufacturing constraints limiting supply. After China emerged as a major manufacturer these constraints became negative and we had deflation: "Too many goods chasing too little money."

The current inflation has emerged due to the throttling off, of just in time supply chains then made worse by the invasion of Ukraine and the sanctions that have flowed both ways leading to a frenzied search for more storage and alternatives to the pipe line fuels from Russia.

If the world gets out of this situation without a major war it should move the world away from fossil fuels and to modern renewable generation, but for this to happen there will have to be a lot of grid level storage. The development of compressed gas storage looks like this technology can deliver the needed storage at a lower cost and more quickly than batteries.

Regards,

Ok thanks.

But how does this translate into an answer to my OQ:

But... how does this work on the supply side? How does constrained supply, create inflation, and at the same time still be a monetary phenomenon?

The only way I can understand falling supply creating monetary expansion, is that suppliers deduce they are in a position of strength, and "try it on" rising prices, and somehow desperate consumers then take on more debt, which results in banks creating more deposits to cover the debt. And hey presto a supply side issue becomes a "monetary phenomenon".

So is that about it? Am I on the right lines here?

Matt

[murraypaul]

No, the regulations significantly cut drivers hours and reduced their pay and many quit the industry leading to shortages.

The changed you linked to did not do that.

[odysseus2000]

motorcycleboy

Ok thanks.

But how does this translate into an answer to my OQ:

But... how does this work on the supply side? How does constrained supply, create inflation, and at the same time still be a monetary phenomenon?

The only way I can understand falling supply creating monetary expansion, is that suppliers deduce they are in a position of strength, and "try it on" rising prices, and somehow desperate consumers then take on more debt, which results in banks creating more deposits to cover the debt. And hey presto a supply side issue becomes a "monetary phenomenon".

So is that about it? Am I on the right lines here?

Matt

As I understand the monetary argument it is that the availability of money is the chief cause of inflation. If there is a lot of low cost money in the system then people are prepared to pay more for any given goods or services to be sure that they have enough. In this way of thinking the only way to stop this is to make money more expensive, so central banks push up interest rates till people will no longer pay for things and demand destruction occurs & this stops gouging so that suppliers of goods & services have to stop raising prices & where possible lower them till they can get sales.

This was often cited in the 1970’s as the methodology of inflation & why money printing would lead to inflation, but that was into a much smaller economy when manufacturing was not able to supply demand & there were far fewer service sectors which did not compete much, a situation that has now changed substantially. Consequently the huge money printing of 2008 & later covid money printing did not create the expected & to central banks minds needed inflation to erode the value of debt.

Inflation happened when there were shortages due to covid & then the just in time economy was torpedoed by the hgv regulations & then there was the Ukraine war that led to energy shortages like happened in the 1970’s when opec raised oil prices.

To my mind the current inflation is all about supply constrictions that have happened in every war ever fought as more & more resources are taken with cost no object to make munitions, & previously by the politicians deliberately breaking the just in time economy via the hgv regulations.

Regards,

[TheMotorcycleBoy]

motorcycleboy

Ok thanks.

But how does this translate into an answer to my OQ:

But... how does this work on the supply side? How does constrained supply, create inflation, and at the same time still be a monetary phenomenon?

The only way I can understand falling supply creating monetary expansion, is that suppliers deduce they are in a position of strength, and "try it on" rising prices, and somehow desperate consumers then take on more debt, which results in banks creating more deposits to cover the debt. And hey presto a supply side issue becomes a "monetary phenomenon".

So is that about it? Am I on the right lines here?

Matt

As I understand the monetary argument it is that the availability of money is the chief cause of inflation.

Aye.

To my mind the current inflation is all about supply constrictions

Uh huh. So..... how do supply constraints, only supply constraints, not lots of cheap money (in other words totally forgot about the demand side of things while you answer this post), increase the availability of money (in order for this as quoted to be the chief cause of inflation according to the monetary argument)?

Earlier I floated these possibilities:

Firstly:
The only way I can understand falling supply creating monetary expansion, is that suppliers deduce they are in a position of strength, and "try it on" rising prices, and somehow desperate consumers then take on more debt, which results in banks creating more deposits to cover the debt. And hey presto a supply side issue becomes a "monetary phenomenon".

Secondly:
When new suppliers appear to fill in the gaps, they spend money (capex, recruitment) and borrow from banks to do so, and then the banks end up create the extra money. Bingo.

What do you think? U-dreamer didn't seem convinced. GoSeigen said something a bit random and then disappeared.

Matt

[odysseus2000]

motorcycleboy

Ok thanks.

But how does this translate into an answer to my OQ:

But... how does this work on the supply side? How does constrained supply, create inflation, and at the same time still be a monetary phenomenon?

The only way I can understand falling supply creating monetary expansion, is that suppliers deduce they are in a position of strength, and "try it on" rising prices, and somehow desperate consumers then take on more debt, which results in banks creating more deposits to cover the debt. And hey presto a supply side issue becomes a "monetary phenomenon".

So is that about it? Am I on the right lines here?

Matt

As I understand the monetary argument it is that the availability of money is the chief cause of inflation.

Aye.

To my mind the current inflation is all about supply constrictions

Uh huh. So..... how do supply constraints, only supply constraints, not lots of cheap money (in other words totally forgot about the demand side of things while you answer this post), increase the availability of money (in order for this as quoted to be the chief cause of inflation according to the monetary argument)?

Earlier I floated these possibilities:

Firstly:
The only way I can understand falling supply creating monetary expansion, is that suppliers deduce they are in a position of strength, and "try it on" rising prices, and somehow desperate consumers then take on more debt, which results in banks creating more deposits to cover the debt. And hey presto a supply side issue becomes a "monetary phenomenon".

Secondly:
When new suppliers appear to fill in the gaps, they spend money (capex, recruitment) and borrow from banks to do so, and then the banks end up create the extra money. Bingo.

What do you think? U-dreamer didn't seem convinced. GoSeigen said something a bit random and then disappeared.

Matt

These are all complex phenomena which is why I prefer the simple idea of too much money chasing too few goods.

You can go round in circles looking for clarity in business/economics but for investors it is all about finding ways to profit.

For the talking heads/politicians it’s all about appearing clever.

Regards,

[ursaminortaur]

motorcycleboy

Ok thanks.

But how does this translate into an answer to my OQ:

But... how does this work on the supply side? How does constrained supply, create inflation, and at the same time still be a monetary phenomenon?

The only way I can understand falling supply creating monetary expansion, is that suppliers deduce they are in a position of strength, and "try it on" rising prices, and somehow desperate consumers then take on more debt, which results in banks creating more deposits to cover the debt. And hey presto a supply side issue becomes a "monetary phenomenon".

So is that about it? Am I on the right lines here?

Matt

As I understand the monetary argument it is that the availability of money is the chief cause of inflation.

Aye.

To my mind the current inflation is all about supply constrictions

Uh huh. So..... how do supply constraints, only supply constraints, not lots of cheap money (in other words totally forgot about the demand side of things while you answer this post), increase the availability of money (in order for this as quoted to be the chief cause of inflation according to the monetary argument)?

Earlier I floated these possibilities:

Firstly:
The only way I can understand falling supply creating monetary expansion, is that suppliers deduce they are in a position of strength, and "try it on" rising prices, and somehow desperate consumers then take on more debt, which results in banks creating more deposits to cover the debt. And hey presto a supply side issue becomes a "monetary phenomenon".

Secondly:
When new suppliers appear to fill in the gaps, they spend money (capex, recruitment) and borrow from banks to do so, and then the banks end up create the extra money. Bingo.

What do you think? U-dreamer didn't seem convinced. GoSeigen said something a bit random and then disappeared.

Matt

The basic answer is that Milton Friedman was wrong. He was a Monetarist who believed that controlling the money supply was the key to controlling inflation - hence the statement which the OP quoted. This theory was taken up by governments in the 1980s in both the US and particularly by Thatcher in the UK. But it didn't work and was largely abandoned in the mid to late 1980s.

[odysseus2000]

ursaminotaur

The basic answer is that Milton Friedman was wrong. He was a Monetarist who believed that controlling the money supply was the key to controlling inflation - hence the statement which the OP quoted. This theory was taken up by governments in the 1980s in both the US and particularly by Thatcher in the UK. But it didn't work and was largely abandoned in the mid to late 1980s.

One of the problems with economics is that people equate economic laws with those found in physics. The latter do not, within very long time periods show any amount of change, but economic laws change as the economy changes. The economy now is very different to that when Friedman made his statements. What he said may never have been right, but it gave an understanding to phenomena that lots of folk adopted & continue to use today.

As Reagan noted:

An economist sees something working in practice & wonders if it will work in theory

Regards,