Reply To: Chart showing a correlation between the TMS and inflation


Money supply growth does not correlate with price inflation rates because price inflation depends not only on money supply but money demand. The growth rates of the money supply have been much higher than rates of price inflation in the last 8 years because people are holding onto money instead of spending it as readily as they normally do. The demand to hold money normally increases in a bust because people want to have liquid assets. Here is a story on the money holding of Apple, Inc.