What impact of printing a lot of money on inflation and Bitcoin

[FanatMonet]

Good question, you can rarely see them. Personally, I think that an injection of such volumes in the future may lead to a slight weakening of the dollar, but now it may not be very noticeable, because money is being pumped from other countries to the United States, and these flows compensate for this.

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[Wind_FURY]

It remains to be seen what the inflation rate will look like in several years time.

It's also difficult sometimes to know what the real rate of inflation is.  Different governments use different formulae to calculate it, giving the impression that they prefer to fudge the numbers a little to make the situation appear less dangerous than it really is.

Isn't the rate of inflation calculated based on the price of essential products compared to the price of last year? I don't know how they can fudge numbers if other economists can see that.

[Tiews223]

6 trillion U.S. dollars will be pumped into the U.S. system alone, that is about $48,000 per family if distributed evenly (definitely not). What is your estimated impact on inflation in half year, 1 year, 3 years etc, and on Bitcoin?

I read from the great book "The Bitcoin Standard" that U.S. prints an average of about 7% more money per year and China prints an average of about 20% more money per year over many years., but the actual average yearly inflation seems to me like about half of those numbers. Is it false or something like improved productivity due to improved technologies, more efficient business models, or profits/wealth taken from other countries that keep the inflation much lower than printing money?

Thanks for any comment and discussion.

Printing so many bills will depreciate the value of dollars. This affects the value of bitcoins just the same as each bitcoins has a corresponding dollar value and when the value of the dollar drops, then the value of per bitcoin will drop as well.

[DooMAD]

It remains to be seen what the inflation rate will look like in several years time.

It's also difficult sometimes to know what the real rate of inflation is.  Different governments use different formulae to calculate it, giving the impression that they prefer to fudge the numbers a little to make the situation appear less dangerous than it really is.

Isn't the rate of inflation calculated based on the price of essential products compared to the price of last year? I don't know how they can fudge numbers if other economists can see that.

Because each government can pick and choose which products they deem "essential".

The list seems to change rather often, generating confusion and raising suspicions.

[bangdik123]

It remains to be seen what the inflation rate will look like in several years time.

It's also difficult sometimes to know what the real rate of inflation is.  Different governments use different formulae to calculate it, giving the impression that they prefer to fudge the numbers a little to make the situation appear less dangerous than it really is.

Isn't the rate of inflation calculated based on the price of essential products compared to the price of last year? I don't know how they can fudge numbers if other economists can see that.

Indeed, the calculation of inflation from the price value that is currently scarce so that the price of products may experience inflation, but from the other side the calculation of import and export calculations also determines because the calculation can be based on the dollar so that purchasing products from outside can be one of the triggers for inflation.

[Wind_FURY]

It remains to be seen what the inflation rate will look like in several years time.

It's also difficult sometimes to know what the real rate of inflation is.  Different governments use different formulae to calculate it, giving the impression that they prefer to fudge the numbers a little to make the situation appear less dangerous than it really is.

Isn't the rate of inflation calculated based on the price of essential products compared to the price of last year? I don't know how they can fudge numbers if other economists can see that.

Because each government can pick and choose which products they deem "essential".

The list seems to change rather often, generating confusion and raising suspicions.

But isn't there a standard procedure for it, something like an average price index for essential goods taken from the current rates, then compared to the rate taken from the year before?

[DooMAD]

Isn't the rate of inflation calculated based on the price of essential products compared to the price of last year? I don't know how they can fudge numbers if other economists can see that.

Because each government can pick and choose which products they deem "essential".

The list seems to change rather often, generating confusion and raising suspicions.

But isn't there a standard procedure for it, something like an average price index for essential goods taken from the current rates, then compared to the rate taken from the year before?

There are at least three procedures for it, RPI, RPIH and CPI.  And, even then, the accuracy of each of those is still questioned in certain circles.  No one seems to be able to agree on which formula is most accurate.  Plus, as I mentioned earlier, whichever procedure they use, they can also change the items they choose to base price increases on.

[wnctalker]

Correct me if I am wrong:  I think increased productivity, more efficient business models, more demand of U.S. dollars from other countries have lowered the dollar inflation rates all these years to less than half those calculated based on new money printing rates.

[johnyj]

Just look at China you will see how much money you can print without cause a lot of trouble. China used to have neglectable GDP comparing with USA, now it is the world second biggest GDP, and during the process, their money supply become the world biggest

[squatter]

Printing so many bills will depreciate the value of dollars. This affects the value of bitcoins just the same as each bitcoins has a corresponding dollar value and when the value of the dollar drops, then the value of per bitcoin will drop as well.

I don't think that's quite the mechanism at work. It's more about the US dollar functioning as the global reserve currency during a period when investors need quick access to liquidity. When such events occur, even safe have assets come under pressure:

Given that gold was the first safe-haven to come under pressure during this period of severe market stress, it is worth considering why this was the first to wobble (see Chart 2). We believe this is also likely due to the severity of stock market declines and the need for investors to liquidate positions and meet margin calls on risky assets (such as equities, high yield and emerging market assets).

Due to the deflationary effects of the economic shutdowns, we also probably won't feel the dollar depreciation for a while, perhaps years.

[teahouse]

6 trillion U.S. dollars will be pumped into the U.S. system alone, that is about $48,000 per family if distributed evenly (definitely not). What is your estimated impact on inflation in half year, 1 year, 3 years etc, and on Bitcoin?

I read from the great book "The Bitcoin Standard" that U.S. prints an average of about 7% more money per year and China prints an average of about 20% more money per year over many years., but the actual average yearly inflation seems to me like about half of those numbers. Is it false or something like improved productivity due to improved technologies, more efficient business models, or profits/wealth taken from other countries that keep the inflation much lower than printing money?

Thanks for any comment and discussion.

The discrepancy is caused by how the government calculates inflation. They use something called consumer price index or CPI to measure how the price of things have increased over time. I will spare you the details and just say they fudge their numbers in variety of ways to make their official inflation statistic look good (3-4% annually). They do this in several different ways. One is by calculating inflation by taking the CPI and excluding volatile economic variables like real estate prices and student loans. There are other methods they use to lower their calculation of CPI and inflation but I won't get into that here, you can Google that on your own time if you wish. In a nutshell, the government understates their inflation statistic to look reasonable so that savers do not get spooked. A crude analogy to explain this would be that of a student that is allowed to write his own falsified report card to show his parents. In a similar way, the government writes their own report card when it comes to inflation.

The reason why inflation is not noticed by the majority of the population can be explained by the fact that it is not uniform across the board. While the price of groceries may have appreciated a small amount, everyone will acknowledge that housing prices or student loans have mooned over the past few decades. If the government inflation statistic of 3%/year is to be believed one must do mental gymnastics or adhere to contrived explanations to make sense of it.