When money is injected, it enters a particular market and then moves through the price structure to other markets. The injected money does not spread instantaneously to all the markets, there is a time lag. The yearly growth rate of our monetary measure—AMS for the US—stood at 79 percent in February 2021 against 3.7 percent in October this year.
It is estimated that the average time lag from changes in money supply and changes in prices as depicted by the consumer price index the CPI is about 26 months. This suggests that the massive decline in the momentum of the CPI is because of the large decline in the yearly growth rate of the money supply. Again, the yearly growth rate of money supply fell from 79 percent in February 2021 to 3.7 percent by October this year…….
The illusion that through inflation it is possible to keep the economy going is shattered once savings begin to decline and the distortions in the capital structure are recognized. Once this happens, the economy begins a downward plunge. The most aggressive expansionary monetary policy would fail to reverse this plunge. Even if easy-money policies were to succeed in raising prices and inflationary expectations, this could not revive the economy.
So, actually, decline in prices is a good thing for consumers, savers and investors but not for borrowers. Isn’t that just tough isht. Borrowers take the goodies when there is inflation borrowing low and paying high, but the reverse with deflation. The supply of goods cannot change as quickly as the supply of money, therefore prices go up. What can you say when the lenders are making money and the borrowers are making money and they are the ones with the power of the state. For the rest of us, deflation should be the order of the day.