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Monetary Base and CPI as Measures of Money and Inflation

Article Quant Q&A · Author: M.J. Rayburn
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Summary

The document asks whether the US government follows a money-printing policy, how such a policy might be measured, and what drives persistent inflation. The response suggests looking at the monetary base as a measure of currency and bank reserves in circulation, and identifies the Consumer Price Index (CPI), based on a basket of goods and services, as a measure of price changes. It points readers to FRED as a source for downloading monetary data.

The answer also points to housing and rent as an important contributor to CPI increases. This is a brief, tentative response rather than a comprehensive account of monetary policy or long-run inflation. It does not explain who sets the monetary base, define the mechanics of money creation, or establish housing as the leading CPI component with supporting evidence. The measures are useful starting points for investigation, but the document does not quantify causal links between money growth and inflation or distinguish the many factors that affect prices over time.

Key ideas

  • The monetary base is suggested as a measure for tracking currency and reserves in the economy.
  • The CPI tracks changes in prices using a representative basket of goods and services.
  • The response identifies housing and rent as a possible important source of CPI increases.
  • The answer is tentative and does not establish the causes of long-run inflation or quantify monetary effects.

Tags

Fixed incomeStatisticsUS markets
Full text
# Cause of long term inflation in the United States


# Cause of long term inflation in the United States












Does the US government have a policy of printing money? If so what is this number called, who decides what it is, and where can I find it? If not what is the cause of our long term inflation? (I'm aware of the impact that the Fed's open market operations have on short term inflation)

## Answer by Rime (score 1)

https://quant.stackexchange.com/a/15382

I do not know if there is a policy but I think one can view how much money is in circulation (I.e. Money being printed) by the Monetary Base. It can be found and downloaded using FRED. As for long term inflation one can use the CPI which is based from a basket of goods. I believe the #1 rising good in the CPI is housing/rent prices.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.