El-Erian was always one of the more sensible economic commentators on CNBC. But this morning, he showed he does not get it either. Basically he said the inflation was due to exogenous factors, & only blames the Fed Reserve for not recognizing that & raising rates earlier. Inflation is due to money printing. Would China or other issues, impact the prices of housing in U.S, one of the most inflationary examples? If anything, fewer foreigners coming / buying U.S. real estate would put downward prices. The Fed balance sheet is the only necessary condition to create inflation.
No money printing is NOT the only cause of inflation. Inflation is always caused by money-printing + reduction in productivity and energy commodity unavailability. The fed can print all the money it wants but if the productivity rises as fast as or faster and/or there is no energy crisis than the rate of money-printing, we won't get inflation. Covid is not the only time that Fed printed money. It started printing money practically after the 2008 financial crisis in order to stimulate the economy, why didn't we get inflation then? It's because we had the productivity to match up. There were enough stuff to buy with our increased money. Right now there is inflation because there are not enough stuff to buy with our money anymore so the price of everything is basically "bid up" hence the inflation. So that commentator is not too far off to say that the inflation this time is due to exogenous factors. If there is no war on Ukraine and no stubborn insistence on the "zero covid" policy by China that caused the energy crisis and the supply chain disruption respectively, the inflation wouldn't be this bad even if Fed raised the interest rate late.
the fed has been “printing” money for 13 years. All of a sudden inflation went bananas and it’s only because the the fed has been printing money?
We did get inflation as a result of all that money printing, we got Asset price inflation. Real estate, stocks, gold, crypto etc Seems so many of you guys have been brain washed by the establishment media and the Fed to believe inflation only happens when consumer prices go up.
Agree. In the "normal course of events," prices go DOWN. The late 1920s was another period where the index seemed to indicate prices not advancing (except stocks.) So Central Bank money printing has supported all asset prices -- bonds, stocks, real estate, cryptos -- for many years, even when "nominal" prices indicate otherwise.
I agree very much with your reply in the main. Fed printing by itself is not the cause of inflation. The fed does print money, but they have no control over the amount printed! It is simply incorrect to imply that the Fed decides on how much to print. When we are talking about the money supply , which is what we are talking about here, we are talking about fractional reserve banking and credit. We should not call credit printing. Credit is temporary money. "Printed" money, i.e., that that results from deficit spending, is semi-permanent money that the fed generates according to Congress's approved level of spending and revenue collection. The Fed of course does have considerable control over reserves and can influence demand for credit via its control of rates.
We got inflation as a result of Fed's printing of money PLUS all of the unfavourable exogenous effects. This is not brainwashing. These are economic phenomena and facts. You need to stop being brainwashed by the half-wit economist-wannabe's who only have a shallow understanding of economics and are now passing themselves off as expert economists doling out these radical theories.
Well WTF took him so long to realize all this? He should have voiced his opinion last year, or even earlier. Just look at the stock market for the last 12 years. That doesn't look inflationary to you, Mr. El-Erian, the sensible economist?