In wake of Coronavirus, when the Fed announces it is printing \$2.2T, what is the impact on inflation?

Does the M2 increase by \$2.2T? (Thus a 12.5% increase in inflation? That can't be right?)

Is it much less impactful than something like that?

  • $\begingroup$ Instead of silently downvoting, please share your feedback with me so I may improve my question, thankyou! $\endgroup$ – Albert Renshaw Mar 28 '20 at 18:56
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    $\begingroup$ Can you link to some source that says that "the Fed announces it is printing $2.2T"? $\endgroup$ – Fizz Mar 29 '20 at 13:35
  • $\begingroup$ And although I suspect you won't understand much from this (given that you haven't even discovered the QE tag on this site), FYI, keyword "sterilization" aier.org/article/the-feds-program-of-two-stage-sterilization $\endgroup$ – Fizz Mar 29 '20 at 13:39
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    $\begingroup$ I'm voting to close this question as off-topic because it is based on assumptions which are not made explicit, are not well-motivated (e.g., referenced). $\endgroup$ – Giskard Mar 31 '20 at 18:03

The Fed is combating liquidity. The risk in the U.S. and most of the developed world is deflation. We are already seeing massive deflation as evidenced by plummeting demand for oil.

Deflation has been the risk for the past 12 years. It’s time to stop listening to your dad/uncle who lived through the devastating effects of inflation in 1970s.

  • $\begingroup$ "It’s time to stop listening to your dad/uncle who lived through the devastating effects of inflation in 1970s." Sorry? Not sure what the implication is there or where you got it from, I don't talk to any family members about economics nor have I for a decade.... $\endgroup$ – Albert Renshaw Mar 29 '20 at 1:00
  • $\begingroup$ The way to think about it is that the Fed is attempting to counterbalance deflation of 20% by adding 10% to the money supply. Oil prices falling by 50% is the canary in the coal mine. $\endgroup$ – Keith Knauber Mar 29 '20 at 2:35
  • $\begingroup$ @KeithKnauber The fed engages in QE to prop up the stock market, encourage lending and discourage saving, to further prop up the stock market. It seeks to amplify private credit creation rather than supplant it. And yes it is on permanent guard now against debt deflation. This stimulus package however is mostly a helicopter drop, and I speculate it will be used to cancel private debt, reducing the load on the fed for further monetary stimulus $\endgroup$ – Frank Mar 29 '20 at 7:08

Does the M2 increase by $2.2T? Yes

Thus a 12.5% increase in inflation? not necessarily

those record lifeline (2.2T) will spark risk assets like stocks, business and company obtain support from authorities to combat effect of the pandemonium no flight no hang out in cafe ultra low occupancy of hotel

in general case, inflation occurs when there is tight supply, or eccessive demand, which we don't see in this circumstances what we see now is no demand due to social or physical distancing no demand no spending

no income for many (so many) business and THE FED IS HERE supporting


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