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An answer, in a thread, because others may gain something by it. https://twitter.com/clairlemon/status/1354207014935646214
The first thing you must do, if you wish to understand the value of an irredeemable fiat money like today's USD, is to entirely expunge the word "backing" from your economics vocabulary. Trust me, it is good for nothing but mischief.
It's true that the dollars the Fed creates are, for accounting purposes, "liabilities." It's also true that, the market value of the liabilities of most financial firms, such as ordinary banks, depends on the value of the assets backing those liabilities.
Should the market value of an ordinary, bank's assets, plus its capital, fall below the nominal value of its liabilities, the bank would be insolvent, and its liabilities, if uninsured, will fall to a discount below their par value.
But this isn't so for a fiat-money issuing central bank like the Fed, because it's "liabilities" aren't actually IOUs, that is, redeemable claims to its assets. They are what former New York Fed President John Exter called "IOU Nothings."
The market value of the Fed's assets might therefore fall more than enough to wipe out its capital without at all affecting the value of the USD. (In fact, the Fed has precious little capital today, so this isn't as unlikely as it sounds.)
The Fed could even operate with negative capital forever, provided it earned enough to cover its operating expenses, or got a budget from Congress to cover them. It could even give money away and get away with it. Some have actually proposed this.
When Fed-created USDs were redeemable in gold, they were "IOU somethings"-the "something" being gold coin. Back then the backing, partly by gold, partly by other assets, of those USDs also mattered.
But the last remnants of gold redeemability ceased in 1968. Backing no longer matter after that. And "oil" never backed the USD and has never been among the Fed's asset holdings.
So, what determines the USD inflation rate today? Broadly: the supply or and demand for USD, and in particular the supply or and demand for the "basic" USD's directly created by the Federal Reserve banks.
You recognize half of this in speaking of the increase in the quantity of USD in the last year. And that increase has in fact been huge. But you overlook the demand side: the concurrent change in people's, and banks', willingness to accumulate USD instead of spending them.
The reason we haven't seen any hyperinflation-in fact the Fed has yet to see inflation achieve its 2% target-is simply that the huge increase in the supply of USD has been matched by an equally large increase in demand for USD.
Banks, for their part, have accumulated vast reserves of Fed-created dollars, holding on to them instead of using them as a basis for more aggressive lending: though they have in fact lend plenty since last February, they could lend more if doing so were more lucrative.
But with interest rates so low, and the Fed paying interest on banks' reserves (albeit at a rate that's also very low), banks just lack profitable lending opportunities.
The public, in turn, has done its own, extensive hoarding since the start of last year. Mainly this has been a consequence of COVID-based or inspired restrictions on economic activity, which have caused people who've kept their jobs-to save a lot more than they usually would.
None of this rules out the possibility that inflation will rise in the future. But there is no guarantee that it will, much less that hyperinflation will happen. That all depends on how the supply of and demand for USD evolve over time.
Here's a post of mine that say's a little more on this topic, inspired by some writings that also overlooked the demand-side of the value-of-money question: https://www.alt-m.org/2020/04/27/return-of-the-inflation-mongers/
