2021 M2 is 2.6 times 2007.
Assume in the worst case that the supply of goods hasn't changed since 2007 and that spending on goods is proportional to M2.
Then we are talking about potential inflation of 260% since 2007.
Now let's refine our model
GDP has risen from 3071B to 4289B. 2007 to 2021. A 1.4 increase.
That's not nominal dollars so even if that 1.4 increase reflects some inflation, it's inflation that we don't have to worry about in the future because it's already manifested.
Thus 7471B/3071B = a ratio of M2/GDP = 2.43 in 2017
Compared to 19,394/4289 = 4.53 in 2021.
4.53/2.43 = a potential inflation of 1.86 or 86%.
Bad but better than 260%.
Now lets look at the spending assumption by examining what has happened to savings.
Personal savings have risen from 380B in 2007 to 3930B in 2021. On a per person savings thats, 380B/320M citizens = $1,188 per person in 2007 to 3930/320M citizens = $12,281 per person in 2021.
You could argue that the personal savings represents a much needed improvement.
And people probably aren't going to dissave in a time of crisis and they may make that change permanent.
So that's my back of the envelope analysis. We might be looking at inflation but it's not going to be hyper inflation (defined as 50% a month) or even 50% a year. A lot depends on what the FED and US government does in the future.
I'm guessing less than 10% a year, as the FED does have a number of ways to manage this. They can reduce the money supply as people go back to work. They can raise interest rates if the economy becomes overheated and bottlenecks start to appear which would decrease the velocity of money. Higher interest rates would increase the government deficit, but the FED could increase their purchases of gov't debt causing the interest payments to flow right back to the treasury. So the impact on the deficit could be mitigated. Still government needs to learn to live within their means. Starting with policies like tariffs that bring the economic engine to full capacity and prevent jobs from going overseas. And tax policies that keeps the engine running instead of being a disincentive. Getting the economy going full speed, cuts government spending in a number of ways, while providing more tax revenues.
Good comment. Inflation has been around all my life, and even during short bouts of deflation people yammer about inflation.
Griping about inflation is just an excuse for not going out and beating it. And beat it is all you can do. You can’t change it, you can’t outlaw it, it’s been around longer than any of us and it’s not going away.
You just have to outrun it, that’s all. The tools do so are available. If they weren’t, no one would be wealthy. But more people are wealthy than ever. How can it be?