There was a big expansion in M2 before the US inflation. Monetarists took a victory lap. M2 has since fallen a lot. There is not much correlation between monetary expansion and inflation across countries, however. The slope of the regression also clearly depends on one or two points. Money or debt, which is it? When governments print money to finance deficits (or interest-bearing reserves), fiscal theory and monetary theory agree, there is inflation. Printing money (helicopters) is perhaps particularly powerful, as debt carries a reputation and tradition of repayment, which money may not carry. A core issue separating monetary and fiscal theory is whether a big monetary expansion without deficits or other fiscal news would have any effects. Would a $5 trillion QE (buy bonds, issue money) with no deficit have had the same inflationary impact? Monetarists, yes; fiscalists, no. Related: The Second Great Experiment Update, Waining Inflation, Supply and Demand and Fiscal Arithmetic and the Global Inflation Outlook
- Date Posted:
- July 10, 2023
On July 3rd the average global air temperature reached a new record. On July 4th the average global air temperature reached a new record. And on July 6th the average global air temperature reached a new record. The biggest influence on the Earth’s temperature, aside from global warming, is the El Niño-Southern Oscillation (ENSO). This is the first El Niño in seven years. Previous highs have often occurred towards the end of a strong El Niño, when the warming pattern has heated the Earth. The recent switch to El Niño, therefore, is unlikely to be the cause of the latest record-breaking temperatures. Its effect should be in full swing next summer, when more records could be set. That would be the first time new records have been attained in two consecutive years.