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Originally Posted by Firebot
Impressive...you basically double downed on the flawed logic. Why stop at decades and just do an average of the last century to show that 2020 was just a blip?
If you add 20% new money supply in a single year, it will have negative inflationary impacts. If you add 10% new money supply the next year rather then balance out, you will have more negative inflationary impacts that has to be absorbed by the economy.
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Which is why looking at multi-year periods is best. If you add 15% to the M2 and don't balance it out with lower increases in subsequent years (which is the mistake they made in the '70s) you have a problem. But if monetary growth in the following years is lower to account for that one-time increase and you stick to the long-term trajectory, then it's not an issue. Not sure what's so hard to understand about that.
But if you don't like 10-year periods, how about 5-year ones?
2017-2022: 8%
2012-2017: 5.7%
2007-2012: 7.6%
2002-2007: 5.4%
1997-2002: 4.1%
1992-1997: 3.7%
1987-1992: 10.4%
1982-1987: 8.9%
1977-1982: 15.2%
1972-1977: 17.1%
I don't see anything anomalous about that. The 5-year growth is right in line with prior recessions in Canada (2008 and 1990) and significantly lower than the high inflation period of the 70s and early '80s.
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Using the 10 year average logic, why worry inflation at all? Inflation in the past 10 years still only averages to under 3% YoY from 2012 to 2022.
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Because inflation exists right now, so they're taking steps to lower it. And a side effect of quantitative tightening that is necessary to make up for the quantitative easing during COVID is higher interest rates, because it drives bond yields upwards.