Will Stimulus Spark Inflation? Two Shocking Theories You Should Know

Will Stimulus Spark Inflation? Two Shocking Theories You Should Know

This is Part 2 in our attempt to answer today's most debated question: Will stimulus cause inflation? I can tell you, this is a beast of a topic. I've sifted through hundreds of pages of internal reports from top Wall Street banks and parsed dozens of columns from the world's leading economists. And if there is one thing I learned, it's that a case can be made for either scenario. Last week, I talked about why inflation fears didn't come to pass after 2008. (Read Part 1 here.) Today, I'll discuss why trillions of "printed" dollars during Covid haven't brought back inflation“”and two arguments (for and against) post-Covid inflation. Let's get to it. Since the onset of Covid, Uncle Sam has poured more than $5 trillion (and counting) into the economy. The flood of money was so immense that it did more than save the "grounded" economy. In one of history's biggest economic shocks, it made Americans“”at least in dollar terms“”richer than ever. Despite that, inflation has barely budged“”which shouldn't be surprising at this point. As we discussed last week, there's no connection between money creation and inflation. For proof, here's a chart that plots money supply and inflation over