Anyone worried that an increase in the supply of money will lead to a rapid decrease in the value of money needs to explain what happened between 2008 and 2019. Money supply through the roof and we barely avoided deflation by keeping the pedal on the metal with QE, record low interest rates, and historically low taxes - all leading to skyrocketing government deficits. We tried to cook up some inflation and barely got 2%, sometimes.
It seems there is some undertow dragging inflation lower than it could have gone in decades past. The usual suspects are:
1) Demographics: Old folks spend less on stuff because they must make savings last and because of medical risk. The US is rapidly greying, and has a percentage of its population over 65 that is where Japan was in the early 1990s. It was a different story in the 1970s when the boomers were young. Cash hoarding does not contribute to monetary velocity; it is disinflationary.
2) Emerging Market Trade: The USD is the world reserve currency, and is transacted globally. When we buy electronics from China or Volkswagens from Mexico, dollars exit the US economy and enter a foreign economy. Once in the foreign economy, some percentage of dollars stay there in the form of treasury reserves, dollar denominated savings accounts, paper cash, or simply circulating in transactions outside the US. As emerging economies grow, they absorb more and more dollars. Thus the number of dollars circulating inside the US economy, where they can affect the price of goods, would drop unless we continually printed more dollars to make up for the ones that left the country. The flow of dollars to fund foreign economies is roughly equal to our trade deficit (hundreds of billions of dollars per year). As these dollars disappear from the US economy, they remain in our statistics.
3) Student Loan Debt: What happens when a large chunk of an entire generation must pay off five and six figure debts before they can buy cars, houses, etc? This is a change from the past when earlier generations could graduate high school, get a union job, and start consuming immediately. If people in their 20s and 30s get a raise, at least some goes to debt service. Previous generations could devote 100% to consumption.
4) Housing Prices: In HCOL areas, housing is consuming more of people's incomes than in the past. This is simply a transfer from home buyers to home sellers, and does not affect the price of a basket of goods, except to the extent that home buyers have less disposable income available to consume other things besides housing. When home prices rise faster than incomes, each sale causes the house to consume more and more of its new owners' income. Additionally, each round of refinancing over the past couple of decades has cost homeowners at least a couple thousand dollars, partially offsetting the reduction in debt service obligations due to lower interest rates. The house-poor must reduce their consumption. Meanwhile the extra dollars they spend on housing sit stagnant in investors' accounts instead of circulating in the real economy. This means less monetary velocity.
5) Easier Carry Trades: It is easier now than in previous decades to borrow USD at low rates and speculate on foreign currencies with higher bond yields. Electronic markets mean even retail investors can buy foreign bonds and trade swaps to protect themselves against fluctuations. This was a lot harder generations ago. So as carry trades increase (e.g. borrow dollars at 2%, buy Columbian government bonds yielding 5%) the number of dollars exiting the US increases. These dollars never disappear from the stats.
6) Self-Held Debt: If tax cuts allow a rich US investor to put $100M into US treasuries, and require the government to borrow $100M to fund its operations, all that has happened between the two is the investor got an asset and the government got a debt. The net amount of change in money is zero, because negative $100M on the government's balance sheet is offset by positive $100M in the rich investor's account. Our stats such as M2, however, say $100M were created from thin air, and some folks could get alarmed by the thought $100M new dollars are circulating in stores and payrolls. Won't the government spend the $100M, thus injecting it into the US economy? Yes, but some of the money will have to be diverted to other rich US investors as interest payments, and some more will leave the economy (foreign aid, military base rents, employee remittances, imports, etc.). Also, had the US government not borrowed the $100M, it would still be in the hands of the rich investor, who would have spent it on something else anyway. The statistics say something big occurred, but good luck finding a net effect.
7) Illegal Immigrants & People Who Send Remittances: We should thank the 10-12 million people who live and work here without documentation. We should thank them not just for paying our taxes, but also because the remittances they send back home drain dollars from the real US economy and allow inflation and interest rates to be far lower than they'd be otherwise. Likewise, many citizens send remittances to their families in Latin America, Asia, and Africa. These transfers help both economies. The US gets to fund its government with printed dollars and underdeveloped economies get cash infusions. Same story: If you remove USD from the US economy, it's as if they don't exist.
8) The Fed's Ammunition Box: The Fed's nearly $8T balance sheet alarms some people, but really it is an insurance policy against inflation. When the Feds buy a treasury, or a bond, or a mortgage, they inject newly created money into the hands of the investor who sells that asset to them, thus adding cash to the economy. If inflation ever got out of hand, the Fed could simply reverse the transaction and sell the asset at whatever market price, thus removing cash from investors' hands and giving them an asset in return. Whereas quantitative easing is theoretically unlimited, quantitative tightening could only occur until the Fed ran out of assets to sell. Good thing they have $8T, and thus there is no credible reason to worry about out of control inflation! QE and QT have replaced interest rates as the primary way the Fed controls inflation. These tools are much more precise and have less collateral damage or unintended consequences than interest rates.
So for inflation to occur, old folks and indebted young people would have to start spending all their money on American-made goods and services, to the extent that this spending offset the trade deficit, remittances, carry trades, etc. to the point that the Fed couldn't slow monetary velocity even by selling $8T in assets.
I think it's pretty clear we'll be hanging out with Japan and the EU in disinflationary limbo for at least the next decade.