Re: Economic report

On 7/22/2026 9:45 AM, Wilson wrote:
> "Inflation is caused by more money chasing the same amount of goods and 
> services in the economy. The correlation between the money supply (M2) 
> and CPI [Consumer Price Index] has historically run with a 12 to 18- 
> month lag.
> 
> M2 is up 5%+ over this past year, and even though June’s CPI and PPI 
> [Producer Price Index] numbers were both cooler, that would 
> theoretically point to some revival in CPI over the coming year. Now, 
> there isn’t anything precise in tea leaves like this, but keep it in 
> mind when framing the debate within the Fed as to the timing and 
> direction of the next change in monetary policy. Also keep in mind that 
> we are at full employment, and that the re-escalation in the Middle East 
> and the move higher in oil prices puts additional pressure on rates to 
> rise too."
> 
> https://postimg.cc/YGHjrmtJ
> 
> - Brian Szytel, The Bahnsen Group

"You described inflation as too much money chasing too few goods or 
services, causing a rise in prices. Isn’t there more to it, though - 
like tariffs playing a role, or oil supply shocks with the war? How do 
those factor in, or is it all baked into that description?"
~ R.S.

"Most of what you’re describing are relative price changes, not 
inflation in the monetary sense. A tariff or a shipping disruption 
raises the price of a specific good, but with the money supply fixed, a 
dollar spent more there is a dollar spent less somewhere else — one 
price rises, another gives way.

What sets the overall price level, which is what inflation actually 
measures, is the quantity of money and the velocity at which it moves. 
Tariffs and oil shocks determine the composition of prices; money 
determines the trend, in other words.

That doesn’t make them irrelevant. A supply shock becomes true inflation 
if it feeds wages and expectations, and several of these factors push on 
velocity, which is anything but constant. Pricing power only sticks when 
monetary conditions let demand absorb it. So the shorthand definition is 
meant to encompass all of it — demand-pull, cost-push, and money supply 
alike."

~ Brian T. Szytel