No one knows where inflation comes from.
Money has been printed in enormous quantities since 2009. We had no inflation to speak of 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021. Only now.
Japan has printed money in unimaginable quantities and STILL has no inflation.
No one knows what causes inflation. Nor does anyone know if interest rate hikes combat it. You will absolutely, no question, get an avalanche of economics schools from Chicago to Stanford and even Wharton who sign onto the money quantity theory, but that doesn’t make it right.
Money is a substance created by whimsy from central banks like the Fed. It comes from nothingness. Why should anything that comes from nothingness be expected to adhere to any imagined laws of nature. The substance itself has only value determined only by the imagination of counterparties.
Calories have measurable value. Or Joules for transport of those calories to your mouth. Everything else is in your mind.
“No one knows what causes inflation. Nor does anyone know if interest rate hikes combat it.”
That sounds like the Modern Monetary Theory idea that the Biden gang were pushing. Didn’t we just get a real world test of it?
Nixon blamed monetary tightening for his 1960 loss. So after he won in 1968 he appointed Arthur Burns and pressured the Fed to keep increasing the money supply. Add to that closing the gold window and price controls on oil and inflation was off to the races.
Bond vigilantes began driving up interest rates even before Volcker was appointed. They would kill bond prices whenever the money supply numbers revealed increases. When Volcker took office he moved in the same direction as the vigilantes, choking off credit creation. Reagan took office and deregulated oil and installed a pro growth tax policy. By 1982 inflation had collapsed, the Fed relaxed their tight money policy in August and the American economy roared ahead without the inflation that had plagued the 1970s.
Bump for later.