2008-2016 with low interest rates/money printing- why didn’t we get high inflation during that time period? ‘because low interest rates don’t necessarily mean inflation’ ok but can you go into it a bit further than that? What made it different than 2020?

Question

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In: Economics

Answer 1

Low interest rates don’t cause inflation, so that’s not part of the situation.

Printing money causes inflation, if that money gets into the broader economy. Before COVID, the government printed a lot of money and mostly used it to balance spending they were already making. This didn’t give people new money, it simply avoided the austerity measures of other countries. There was inflation in investments like houses and stocks, but the people involved were mostly using retirement accounts to reduce their taxes so it didn’t get into the general economy.

COVID spending was a completely different thing. Government was printing checks and sending them to everybody. That directly injected the money into the economy and caused a lot of inflation.