[mostly_harmless]

I think what's missing here is in case 1, it's not just the amount of money, but how much money is chasing each available good. You can imagine if the money supply doubles, a loaf of bread can be the same price as before if there are twice as many people demanding the same portion of bread (for a very crude approximation)

Or to put it another way, maybe case 1 is demand-side inflation, and case 2 is supply-side inflation.

[mnd999]

If the money is doubled but most of it goes into offshore investment funds because those on the receiving end already have enough bread then the price of bread doesn’t really change, but venture cap funding becomes more readily available.

[zeroonetwothree]

An investment fund is not a bank vault. The money leaves the fund and enters the economy. In particular it will be invested in companies, which will use it to buy assets and pay wages. The effect is similar as if you had spent it in the first place.

[danuker]

And P/E ratios go to fantasy land!

[zeroonetwothree]

It’s hard to imagine that demand for bread doubling doesn’t result in the price going up. I don’t think this is the example you were going for.