M2 turned up sharper than ever in the last 2 years but the velocity of M2 turned down sharper than ever too. I can't tell you the exact net effect but they balance each other out to a large degree with it being tipped in the direction of too many monetary units. IMO the primary reason prices are rising is because of lower production. The fed is raising rates into a recession for one reason only: They need to be able to lower rates when we are in a recession. That's their only tool and rates were near zero. The solution is to raise quickly when you see the recession coming and lower slowly when you are in the recession. It's pointless but that's what they are going to do. It keeps them looking relevant. You are correct that higher rates cannot help with production. lol. The fed is painted into a corner. Their games just produce volatility and delusion. Keep in mind that we no longer have market rates for money. The FOMC targets rates. This will allow them to raise interest rates while also raising M2. Many people make the assumption that raising rates reduces the money supply but that has never happened in America.
because it slows the demand for production. housing starts are dropping because a wage earner can’t afford the higher mortgage.
where was this demand for production coming from during a pandemic if the velocity of money was unchanged?
Velocity changed. Look at the fed's M2 velocity chart. It dropped faster than ever. All this isn't quite so simple because it's not the consumer that caused this velocity drop. It's the banks putting their money on deposit at the fed. $2.3 trillion of it if I recall correctly. Consumers definitely spent the money that came to them in the form of free checks during the pandemic. It was so destructive.
He asked a rhetorical question to counter the claim that supply/demand dynamics equate inflation. It does not, I agree with @2rosy. He used a good example to deflate this claim by @newwurldmn.
Sure they "can" go negative but that comes at great cost to the fed's credibility. It would create all sorts of problems with the general public who won't understand why money is being taken out of their bank account every month. The fed will go to great lengths to avoid that scenario.