[Mr.Coffee]

Originally Posted by opendoor

No, not at all. In fact it makes right now look worse because those prior periods were far more prolonged. If I took the the post-2010 period to compare to prior decades, then the monetary growth now looks quite modest:

1970-1980: 15.7% a year
1980-1990: 10.77% a year
1990-2000: 3.96% a year
2000-2010: 6.85% a year
2010-today: 6.53% a year

So even with the big increase in 2020, we're still seeing relatively low growth in monetary aggregates over the longer term which will generally lead to modest inflation (at least inflation that's influenced by monetary policy).

They're not removing money from the market; the aggregates are just growing more slowly. Which is the exact same thing that happened in 2007-2009. Fast growth at the worst point of the crisis (2020 was 17% vs. 2008 which was 14%), and moderate to slow growth in the other years to get things back on the long-term trajectory. It's totally normal given the magnitude of the crisis and there's nothing remotely unprecedented about it. There's a reason that basically every developed nation in the world did the same thing to varying degrees.

Over the last 50 years, the M2 growth in 2020 would rank 3rd, 2021 would rank 27th, and 2022 is on pace to rank 47th. So a pretty normal distribution given the context.

And things aren't all that different now. Over the last 50 years, inflation in Canada has roughly correlated with the increase in monetary aggregates minus 3-5% (which is more or less GDP growth). So when we had 12-17% annual increases in monetary aggregates we had 7-12% inflation rates. Now that we're seeing 6-8% increases in monetary aggregates inflation generally meets the target rate. So the current situation of monetary aggregates leading to high inflation looks like a temporary blip. Now if energy keeps getting more and more expensive year after year like it did in the '70s (oil went up 13x from 1973 to 1982), then we'll still experience inflation, but I don't see that happening.

Energy costs are DEFINITELY going up in the medium to long term. You can take that to the bank actually.