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How can they affirm that inflation is from supply chain problems and not from monetary expansion?

Fingerpointing supply chain and liner operators as the only cause for inflation is childish

Everybody is talking about the fact that the current inflation derives from problems on supply chain distribution but Fed, the European Central Bank and many other central banks also printed tons of money during the pandemic and thereafter.

Inflation depends both on money supply and output which depends on supply chains. Inflation is given by an equilibrium on money marke, So, concepts like the money supply, price levels, real output and interest rate influence the inflation levels.

However, that does not mean that monetary policy has no effect

In fact, inflation can be caused by a significant increase in the money supply and credit expansion. If this increase is not accompanied by a corresponding increase in the supply of goods in the market, commodity prices will inevitably rise. This can happen directly, by increasing the amount of money issued by the competent state authorities (central bank). It is done indirectly through the issuance of government bonds or other bonds and their sale to the banks, which use these securities to raise money from the central bank. Monetary expansion can also be caused by the multiplier operation of the banking system.

Inflation can also result from a strong increase in active demand. In this case, price increases are a result of increased demand relative to supply in an economy, especially because supply has very little or no elasticity, due to the full employment of available means of production and technology. The more inelastic the supply, the higher the inflation.

 

Inflation can also be caused if there is an increase in production cost data. This type of inflation is due to the weaknesses and distortions of the market mechanism, but also of the state mechanism. Among the factors that favor cost inflation are oligopoly practices, low labor productivity, wage increases at a faster rate of productivity growth, high tax burden, rising commodity prices, and so on.

 

Finally, inflation can be imported, that is, caused by an increase in the prices of imported goods, external demand or the inflow of liquidity

 

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