Inflation is an increase in the money supply, of which a rising
general price level is just one possible result – and not the most
More often, excessive money creation shows up as asset
bubbles, where the new money, instead of flowing equally to all the
products that are for sale at a given time, flow disproportionately into
the ‘hottest’ asset classes. Readers who were paying attention
in the 1990s might recall that the consumer price index was
well-behaved while huge amounts of money flowed into financial assets,
producing the dot-com bubble.
The same thing happened in the 2000s, when excess currency flowed into housing and equities.
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