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RE: The Value of a Dollar

in LeoFinance2 years ago

The supply chain disruptions resulting from lockdowns and the cascading effects of that ever since are certainly a factor, and I agree with you and @taskmaster4450 that this has certainly caused an increase in prices. Fewer goods and services with no change in demand or money supply will certainly still increase prices. This is not the only variable to consider though. The massive price increases that we've seen have also coincided with the growth of M2 from 15 trillion to 21 trillion since Feb 2020. There has been a recent decline in M2 since March 2022 to the tune of about 500 billion, but it's relatively small compared to the 6 trillion increase over the previous 2 year period. We still have roughly 40% more dollars in M2 than we did before the pandemic. How is it even possible that this doesn't also put upward pressure on prices? It's simple supply and demand. All else equal, increased supply of dollars will reduce the price of those dollars as measured against other units of account, which will have an inverse effect on prices as measured in those dollars.