Inflationary Derp

Once again, Krugman takes on the inflationistas, aka your typical derpy Republicans.  Their tired story goes this way:

Vice Chair Yellen will continue the destructive and inflationary policy of pouring billions of newly printed money every month into our economy, and artificially holding interest rates to near zero. This policy has been in place far too long.

Of course, it's nonsense.

PK shows this from FRED, here as graph 1.

 

Graph 1 - Monetary Base and Inflation since 2009

Sure, enough, a big, big change in Money and a pretty flat non-response in Inflation.

But this is only short term, since the Great Recession [GR].  Lets take a longer view in Graph 2, using the same FRED database.  Here the two data sets are on opposite axes, to let Inflation more visibly inflate.

Graph 2 - Monetary Base and Inflation since 1970

Aside from the Great Inflation Dragon, ca.1980, it's been a rather steady and featureless climb for Inflation up until the GR wiggle.  The Monetary Base had a slightly faster than linear rise, until the three recent big steps up.  

PK's point, then, is well taken.  Let's look at it a different way.  Here in Graph 3 is Inflation as a function of the Monetary Base.

Graph 3 - Inflation vs the Monetary Base, 1970 on

Pretty dramatic.  In the past, it would have seemed that increasing the Monetary Base correlated with rising Inflation. Suddenly, though, when the GR arrived, that stopped and stayed stopped.   More likely, though, both variables just trended up over time, each for its own reasons.

Here is the same graph, with the GR truncated.

Graph 4 - Inflation vs the Monetary Base, 1970 through 2007

But if you look at annual changes, a somewhat different picture emerges, as seen in Graph 5.

Graph 5 - Inflation vs the Monetary Base, Annual % Change

 It's hard to see an overarching pattern here, but at a detail level, it seems that the movements are contrary.

That appears to be an illusion, though.  The scattergram in Graph 6 below, with Inflation on the vertical axis, suggests that there is no relationship at all.  Note that this data set is truncated at 2007, so there is no effect from the GR.

Graph 6 - Annual Change in Inflation vs Annual Change in Monetary Base, Through 2007

There are big changes in the Monetary Base with almost no change in Inflation; and big changes in Inflation when the change in Monetary Base is small.   In post WW II America, there is no broad correlation between Monetary Base growth and Inflation..

Including 2008-13 in Graph 7 emphasizes just how different those years really are.

Graph 6 - Annual Change in Inflation vs Annual Change in Monetary Base, Through 2013

Just to demonstrate that the money measure doesn't matter much, Graph 7 shows the annual Inflation rate vs the change in MZM.

 Graph 7 - Annual Change in Inflation vs Annual Change MZM, Through 2013

Now the Christmas tree shape is leaning hard to the left, suggesting, if anything, that the relationship between Money supply growth and Inflation might be negative.

What this leaves us with is very few things inflating these days, other than the money supply and Republican derp.