An Optimistic take on why money printing isn’t causing Inflation

To understand this, first, we have to understand what exactly is inflation and why it even occurs at the most fundamental level.

Inflation is an increase in the level of prices of the goods and services that households buy. It is measured as the rate of change of those prices.

It occurs as a side-effect of supply and demand. Say there was an isolated community that had a total of 10 apples. Assume that this community was unable to grow any further apples, but people still needed to eat. Putting aside the dire situation, It’s not difficult to expect that the price of each apple would be extremely high. As people ate each precious apple, the value of the remaining apples would obviously increase… This effect is one of the two arms of inflation; Dwindling supply.

Let's now assume we arrived at this community and gave them all a thousand dollars. It’s reasonable to expect that, while happy for the thousand dollars; They would easily trade their new-found wealth for one of the few remaining apples, and thus the ‘value’ of each apple would increase. This is the second arm of inflation; Excess cash.

The only two reasons inflation (and thus hyperinflation) could ever exist is excess cash and dwindling supply.

But these two arms aren’t unrelated. They are the arms of a weighing scale.

If we supplied one thousand dollars to each resident of the community, while at the same time provided them with additional apples; As one would expect: The price of an apple may remain steady if cash and apples were injected at the same quantity. If apples were injected at a far higher rate than cash, each apple may eventually become worth very little.

Okay.. So what does that mean for our situation?

Clearly, we are injecting huge sums of liquid cash into the economy. Given our simple example with the apples, we would expect that everything today would have drastically increased in price, Perhaps by almost double since 2014!

But that's not what we’re seeing.

Could it be possible that the reason we are not seeing inflation, is because humanity is simply so productive?

Could it be that we as humans have hit a point behind the scenes where we can so efficiently make cars, food, hotels and even novel experiences that we have far more of what we want and need than our money can pay for?

In western countries today, the primary problem isn’t hyperinflation. It’s a deflationary spiral. One in which money itself becomes the thing which we need more of.

We as a society have too many apples.

I posit here that this is the reason inflation isn’t spiralling out of control (despite the unprecedented printing of money).

Humanity has begun to enter the early stages of post-scarcity.

It may not be pretty, it’s not what the sci-fi authors of the past sold us, but humanity has reached some form of “proto-utopia”. One in which we are so productive that printing trillions upon trillions of dollars barely moves the needle of day-to-day prices even during the midst of a global pandemic when our productivity is supposed to be at it’s lowest.