Show HN: M1 Chart – The stock market adjusted for the US-dollar money supply
A lot of people say there’s no such thing as asset inflation [1] and I find that very confusing. Hypothetically, if we add $1T to the economy and everyone invests it into stocks, is that not inflation? I guess economists say it’s not, but it feels like a pedantic argument about assets being “overpriced” not “inflated”.<p>I think our current method of measuring inflation against the CPI is nonsense, the basic premise that you can assume the price of e.g. milk is stable doesn’t even make sense. There’s changes in manufacturing, quality, brands, and market demand that aren&#x27;t accounted for in the CPI.<p>Measuring inflation (or whatever you want to call the difference between an asset&#x27;s nominal value and it&#x27;s intrinsic value) is still useful, but the current method of pegging everything against the bag-of-goods in the CPI seems like an overly simplistic model. This approach of normalizing asset prices against the M1 supply seems more reasonable to me. The intrinsic dollar value of an asset is its value relative to how many dollars there are, not relative to whatever the price of milk is.<p>1. <a href="http:&#x2F;&#x2F;noahpinionblog.blogspot.com&#x2F;2013&#x2F;07&#x2F;asset-price-inflation-is-not-inflation.html" rel="nofollow">http:&#x2F;&#x2F;noahpinionblog.blogspot.com&#x2F;2013&#x2F;07&#x2F;asset-price-infla...</a><p>Edit: I am clearly not an economist, please see some of the informative comments below. In particular, it sounds like the CPI does account for some complexities, asset inflation is more commonly supported than I thought, but normalizing by M1 might not make any more sense than CPI.