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While recent posts have myth-busted the narratives that money printing causes inflation relationship between inflation and interest rates. The conventional view is that long-term rates move in response to inflation, although is not that high, but there is a visible correlation nonetheless. I was recently looking up some UK inflation data and noticed that the Bank of England publishes inflation data going back to 1210! the UK’s current borders), I feel compelled to share my favorite Braveheart meme (from the Scottish independence referendum of 2014). we’ll be asking if increases in the money supply lead to higher interest rates? Let’s look at the money supply and 10-year interest rates in the five largest economies. First up: the US. The verdict: increases in the money supply do not necessarily lead to higher interest rates. In fact, the above data from the five largest economies during a period of unprecedented expansion in the monetary base shows zero evidence that increases in the money supply drives rates higher. Apologies to the self-described bond vigilantes and Tea Partiers for the cognitive dissonance. Do increases in the money supply cause or accelerate inflation? First, a chart of the annualized percentage changes in the money supply (M1) and consumer price index (CPI). We can also look at the same data, but use the absolute value of the money supply. Again, inflation does not seem correlated with increases Let’s look at other economies and monetary bases. First up: the Eurozone. Verdict: increases in the money supply do not necessarily cause or accelerate inflation. The above charts represent decades of data from the five largest economies during a period of unprecedented increases in the money supply. I understand that there is a logical rationale and belief that printing money leads to inflation, but it is simply not true. I am not sure what more evidence can be provided, yet the If a cartoon is worth a thousand words, then the above should suffice for a blog post about sustainable investing.