Money supply is simply money in circulation. Monetary policy attempts to control this, thus, attempting to keep a little bit of inflation and keep it in check.

To answer your question:
Picture a helicopter full of unlimited supply of money, just flooding the streets, from city to city, coast to coast, as it drops money into circulation literally. So, given the extra money in circulation, this "waters down" the value of that money. So the $20 dollar bill you pick up will have less purchasing power, because there is soooo much more money in circulation.

Inflation (a little bit, not helicopters), is good -- The simplest way to think about this: We don't want consumers waiting to make a purchase. We want you to walk into a store, see a TV you like, and purchase it. We don't want you to think "hmm... my dollar may be worth more tomorrow, so I will wait". We want you to inherently know that your dollar LOSES value over time due to inflation. So you think "hmm.. my dollar is at peak value today, I will purchase the TV now".

The Fed has target inflation of 2% which has historically kept the economy from going into recession. Deflation has been top of mind for central bankers. They have literally had to throw full weight of their power to try and get inflation to pick up.

Hope this helps!!!!

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That's correct.

You also have monetary inflation, which is what the FED does.

The "solution" to the 2008 crash was to print money. The FED discovered something very interesting (but evil): if you print money and give it to the masses, price inflation happens. In that case monetary inflation leads to price inflation.

BUT. And here's the evil twist to the FED's game: if you print money and that money stays with bankers, and never reaches The People, then price inflation does not happen. Because The People can't spend the newly printed money.

That's the FED's game. They print money for bankers. This money never reaches you.

If you try to buy stocks and other equities, you'll find that your money isn't worth anything because the FED has printed trillions of U$ and bankers buy it all cheaply while you work 9-5 for 30 years to build savings that they can simply pull out of their virtual money system.

That's the cruelty of the FED system. They simply print money for themselves, this money never reaches you. 15 families for whom they print money hold half the world's wealth, while 7 billion people work for them for free.

That's the difference between monetary and price inflation. The FED discovered a way to get one without the other and that's what's destroying the middle class around the globe.

Contrary to what many believe, I don't think the money creation was intentionally 'evil' (ie for the purpose of hurting classes of persons) but merely a knee-jerk response to the fear of loss (and consequent lobbying/pressure) by the owners of the 'capital' (actually only money) which was under threat from the 'crisis'.

Of course, the crisis should have taken its course, and removed the dead-wood capital from the system, to allow fresh solid growth. Had that happened , a few years of deep recession would have been followed by a well founded fresh growth cycle.

Love the analogy. What are your thoughts on the effect of liquidity on price?

If the liquidity characteristic of supply is adjusted, could that be a way to regulate price? What if that rate of liquidity change was voted on in a democratic way? I ask because one of the projects I follow, BitBay (BAY) is attempting to do that exact thing. Wondering if the principles hold up or not.

I'm a supply side economist.  Build it and they will come!

the market has a disproportionate potential. but for now he presents itself only a jungle filled with chaos.

That's one the reason of creation of cryptocurrency. Like what happened in venezuela when they experienced hyperinflation since at least 2014. Bitcoin unexpectedly save their country from economic collapse. venezuela uses bitcoin as their currency and it was the first time that bitcoin used as currency.
Because of this, venezuela became one of the Biggest Markets for Crypto in the World.

Much depends on the regions. In fact, inflation is not the best indicator of economic stability. Since inflation depends on many factors. in the third world, it is minimal, while in Europe and North America there is a significant increase.

we would have Economical problems Long time ago.
the money has been printed way too much...
and its devalued if the right methods not used by government and feds.

but guess what?  : D

Our government not dumb


They have eliminated money supply,  Smart ways.
as we all see that cash is Less and Less in circlelation.