WilderSueden
2022-06-28 14:38:13
- #1
This again shows your gaps in knowledge. You might score points with this at the pub, but in reality, no physical cash is needed. Central banks are actually not the ones who truly create the money; that happens in commercial banks (savings banks, cooperative banks, private banks...) by granting loans against which only a partial balance of the bank stands (practically so little that you can roughly set it as "nothing"). The money supply in circulation is thus strongly controlled by interest rates. At low interest rates, many loans are granted, and thus a lot of money is created. An interest rate increase has exactly the opposite effect.It already starts with the fact that what a central bank can create electronically is not money that ever reaches the pockets of citizens. For that, it would have to physically print and distribute cash.
Nothing is disproven here, only not reasonably demonstrable in practice. However, the connection is so obvious that it must have a kernel of truth. On the one hand, we have different money supply definitions that have different impacts. On the other hand, you have the problem that a) effects often occur with a time lag and b) market participants do not work with perfect information, and this information neither spreads immediately nor evenly. Information spreads in waves (Robert Shiller likes to use the word "epidemic"... he had already completed the work on "Narrative Economics" in 2019...). These waves can then also generate their own shocks, but also spirals. If you then look back with a fully rational perspective, of course no direct connection to the money supply emerges anymore.And the connection between money supply and inflation is so thoroughly empirically disproven…