Money For the Rest of Us · Wednesday, July 15, 2026
Host David Stein explains that inflation is driven by three primary factors: the amount of money in circulation and its growth rate (primarily through bank lending and quantitative easing), the speed at which money is spent (demand intensity), and capacity constraints in the economy. He cites the post-pandemic period as an example where increased money supply and spending led to higher inflation.
“But underlying it, how much money is there and how fast is that money supply increasing? That's primarily through bank lending. As banks issue loans, that creates new money. The money supply also increases through what some would call central bank manipulation, quantitative easing. They buy bonds in the marketplace. They create money.”
“But the other thing then, was how quickly is money being spent? What is the demand, the intensity of purchasing? Is more money going into savings or are people actually buying goods and services and putting price pressures?”
“And then the third thing is, how much is there to buy? Are there capacity constraints? Like we saw following the pandemic, coupled with a great deal more money and people willing to spend it, that's why we had higher levels of inflation.”