ELI5. If inflation is driven partly by surplus money in the system, will big losses in stocks and crypto reduce inflation by reducing the amount of money?

Question

I keep hearing about multi-trillion dollar losses in retirement funds, investment funds, and crypto markets. If all that value is evaporating, doesn’t it increase the value of currency and reduce inflation?

In: 45

Answer 1

It may not be affected. If you look at 2007 (2.8% inflation) and 2008 (3.8% inflation), trillions of dollars in value disappeared in the housing market + investment banks, and inflation wasn’t really affected. The largest insurance company lost over a trillion.

It’s not that it can’t happen, but the economy will probably need to slow down even more.