Does the increase in central bank money supply inevitably lead to inflation, or even hyperinflation? The money supply created by the central banks has multiplied. But inflation has not multiplied. At least in the sense of consumer prices. The increase in asset prices is much higher than in consumer prices, but not as high as the money creation of the central banks themselves.
Prof. Christian Rieck explains (german video) why it is crucial to understand how central bank money is created in the first place. Thus, he explains when the turning point to inflation occurs. According to Christian Rieck, the decisive factor is not the money supply itself, but rather the quality of the central bank balance sheet and the “ketchup effect“, which is “highly non-linear”. A central bank cannot technically go bankrupt, but if the quality of its balance sheet deteriorates (visible in equity, among other things), confidence is still lost. This leads to a devaluation of money (i.e. inflation comes).
How can one recognize the deterioration in the quality of the central bank balance sheet (see the presentation by I.B. Sauer)? And from when does one know that inflation is at an early stage and will soon intensify?