The theory
The quantity theory starts from the identity MV = PQ — money times velocity equals prices times real output. If velocity is roughly stable and output grows on its own trend, sustained money growth beyond output growth must eventually show up in prices. Over long horizons and across countries, the correlation is among the strongest in macroeconomics: every hyperinflation in history has been accompanied by explosive money growth, and no country has sustained high inflation with a flat money stock. The disputes are about the short run, the direction of causation, and that word "eventually."
The case of the 2010s
After 2008 the Fed's balance sheet roughly quintupled, and prominent voices predicted debasement and runaway inflation. CPI inflation instead averaged below 2% for a decade. Two resolutions: first, most of the "printing" created bank reserves, not spendable money — M2 grew a mundane 6–7% a year, as the QE explainer details. Second, velocity fell steadily, absorbing what money growth there was. The 2010s did not refute the quantity theory; they demonstrated that base money is not money in the relevant sense, and that V in MV = PQ is a variable, not a constant.
The case of the 2020s
In 2020–21, policy differed in kind: QE ran alongside trillions in fiscal transfers deposited directly into household accounts. M2 rose over 25% year over year at the peak — the fastest on record, and visible as a cliff on this site's dashboard — leaving it about 50% above its January 2020 level today. Inflation reached 9% in mid-2022, its highest since 1981. Monetarists claim vindication, and the timing fits their lag of roughly one to two years. The competing account blames supply chains, energy prices, and reopening demand, noting inflation was global and hit countries with slower money growth too. Careful post-mortems generally find both: supply shocks set the spark, but the money and the transfers were the fuel that let it spread and persist.
An honest scorecard
Three statements survive both decades. Sustained, large money growth in excess of output growth is very reliably inflationary — at extremes, always. Modest money growth tells you little about next year's CPI, because velocity moves and lags are long and variable. And the kind of money creation matters enormously: reserves parked at the Fed are inert; deposits in household accounts are not. That last distinction — who gets the new money — turns out to be more predictive than the raw quantity, which is why How Money Is Created is the companion piece to this one. To see the raw dilution side of the ledger for your own dollars, the money supply calculator computes it directly; the inflation calculator shows what prices actually did.
Related reading
The Velocity of Money · What Is CPI and How Is It Calculated? · Quantitative Easing and Tightening, Explained