Comment by echelon
> prices are dependent on demand/supply rather than how much money people have.
That's not the full story of how the economics of demand work.
Demand increases as the money supply increases, but supply remains constant. This is inflation. More dollars chasing the same basket of goods.
Another way to look at it is as the money supply increases, the cost of money and the cost to borrow decreases. This leads to an increased desire to spend. It's an aggregate demand increase across businesses and consumers.
We recently saw the impact of this when the money supply was increased during Covid. It led to one of the largest jumps in inflation in our lifetimes.
> Another way to look at it is as the money supply increases, the cost of money and the cost to borrow decreases.
I'm going to say something radical here, so do hear me out. any bank that loans money, is increasing the money supply. the more banks lend, the more money is printed. There is no fixed supply of virtual money. We don't really know how much actual dollars there are out there. (ignoring eurodollars)
Banks profits are literally because they are printing money. The very act of loaning out means that the 1 dollar bill you deposited with become 1.8, as its loaned out again to someone else, who then repays it, with interest.
<<end radicalism>>
Sure we had QE, we had covid cash, but the problem with using covid as an example of "giving money to everyone causes inflation" is that its difficult to distinguish from supply chain, tariffs, stimulus and $other.
the other problem is that stimulus was given to companies as well.
but the argument about not increasing the money supply is difficult to argue unless you are a bank, because that's their job, not the government's.
so, the point is, the economics of demand is an approximate model, rather than a formula. Its based on the collective perceived value of a good or service, rather than a strict supply/demand. sure its a close approximation, but not an accurate one.