Topic: Money Supply Growth Has Never Been As High As It Is Today (Read 417 times)

Arguably, the situation was irreversible from the offset.  It follows rationally that:

• the greater the debt there is within the system, the more money they have to print from nothing to feed the debt
• the more they print, the greater the debt becomes

Rinse, repeat.  It's a self-fulfilling prophecy.

Sure, money supply growth looks bad now.  But I guarantee it's going to look even worse in another 10 years if it hasn't collapsed already.  It was always going to go this way.  It's unavoidable.  There's a clear design flaw that makes failure inevitable at some point.  I'd imagine that's why satoshi went about it in a completely different way when they designed Bitcoin.

Inflation is a breaker for economic growth. Most government need to look for means to solve the inflation problem because the world crisis is increasing daily and price of goods keep going high because of scarcity. If you check into the European economy, you see hike a little in price and that is going to affect the euro, meaning more euro is going to chase few goods and inflation gets higher.

Government find new solution for the crisis. However, this will make the situation even worse in the next years. Inflation will burn this money sooner or later

There will come a day when the situation is irreversible and forced to convert to another currency.

The growth in the amount of money supply has always indicated the inevitability of inflation growth. The current inflation can be very strong and lead to a rather severe economic crisis. This has been discussed periodically for a long time. The onset of the second wave of the coronavirus pandemic has again sparked talk of an economic crisis. If it does come, it is possible that the crisis could have a positive effect on the popularity and demand for cryptocurrency. We also talk about this for a long time, but we do not have such experience yet. This may be the first global economic crisis during the existence of a cryptocurrency.

It's been a concern for a while now, but for whatever reason we haven't seen rampant inflation (Venezuela, Zimbabwe, and one or two other countries aside) yet.  I'm not sure why that is, because this out-of-control money printing has been going on for years now, and interest rates have been near zero for about as long.  But just because the inflation tidal wave hasn't hit our shores yet doesn't mean it's never going to.

The Inflation is bound to affect not only the people but the country as a whole , but I do believe it's going to be worse for the nations who rely on import, even of basic things like flour and vegetables.

Yes this is one of our most dire concerns. The huge money supply needs a strong back support , the country must be able to tolerate it , but unfortunately due to the pandemic I don't believe that they can keep this up for long.

The Inflation is bound to affect not only the people but the country as a whole , but I do believe it's going to be worse for the nations who rely on import, even of basic things like flour and vegetables.

{Taken from google}

So these countries will be worst hit eventually.

The zero interest rates aren't helping actually, people are taking loans more and eventually they would have to pay off somehow, it might stimulate economic activity for a while but unfortunately right now every country is at a peak.

We need more job creation.
More production of foods and other resources in the countries themselves.
Better and cheaper healthcare facilities right now.
Free distribution of masks and gloves , because I have seen shops selling masks for 0.5$ -1$ , unaware that this would just cause more problems.

We need to go though this pandemic without loosing the value of the printed money.

Unfortunately, the urgent need for more and more money is there. So the Fed cannot just easily pull out a considerable amount from the circulating supply into thin air in order to somehow counter the incoming huge inflation wave. It is imperative during this pandemic to try to keep the economy afloat in whatever means necessary despite the fact that stores are closing, companies retrenching, others even declaring bankruptcy, people losing their job, and so forth.

It's been a concern for a while now, but for whatever reason we haven't seen rampant inflation (Venezuela, Zimbabwe, and one or two other countries aside) yet.  I'm not sure why that is, because this out-of-control money printing has been going on for years now, and interest rates have been near zero for about as long.  But just because the inflation tidal wave hasn't hit our shores yet doesn't mean it's never going to.

It's been a concern for a while now, but for whatever reason we haven't seen rampant inflation (Venezuela, Zimbabwe, and one or two other countries aside) yet.  I'm not sure why that is, because this out-of-control money printing has been going on for years now, and interest rates have been near zero for about as long.  But just because the inflation tidal wave hasn't hit our shores yet doesn't mean it's never going to.

This sort of makes me wonder if this is the reason why corporations like MicroStrategy and some others have been buying bitcoin to keep on hand in lieu of cash.  To me, that seems like an incredibly unorthodox move for any publicly traded company--but it could well be the case that they see the disaster coming from a vantage point that the rest of us don't have access to.

These are crazy numbers, Hydrogen.  It might be a good time to be buying both bitcoin and gold, but I'm still not comfortable with what might be on its way.

Inflation is becoming a legitimate concern. Savvy investors are putting their money in gold and bitcoin in an effort to avoid having their wealth be devalued.

That quote was a description of the relationship between fiscal policies, GDP growth and inflation. During a recession, just as this one, banks adopt policies to cushion the effect and turn the eonomy around. Injecting cash into the market can function to increase productivity boosting the GDP, it can also lead to inflation; However, all of these factors are dependent on the circulation of money being pumped into the market. If stimulus checks sit around as savings in banks, it does not influence inflation and also doesn't help the economy.

This suggests why the cash injection which has been going into the market may not increase inflation as most people fear. The pandemic has created an unconducive environment for production, reducing the velocity of money flow and conversely reducing its effect on inflation. This is why I think countries would feel the effect of money printing at a time in the future when the economy has recovered and all those idle money returns to circulation.

The mainstream media acknowledges the US monetary supply is growing at its fastest rate since the 1980s. Inflation is becoming a legitimate concern. Savvy investors are putting their money in gold and bitcoin in an effort to avoid having their wealth be devalued.

This scenario is one that has been mentioned and discussed on this forum countless times over the years. I wonder what people think of this.

That quote was a description of the relationship between fiscal policies, GDP growth and inflation. During a recession, just as this one, banks adopt policies to cushion the effect and turn the eonomy around. Injecting cash into the market can function to increase productivity boosting the GDP, it can also lead to inflation; However, all of these factors are dependent on the circulation of money being pumped into the market. If stimulus checks sit around as savings in banks, it does not influence inflation and also doesn't help the economy.

This suggests why the cash injection which has been going into the market may not increase inflation as most people fear. The pandemic has created an unconducive environment for production, reducing the velocity of money flow and conversely reducing its effect on inflation. This is why I think countries would feel the effect of money printing at a time in the future when the economy has recovered and all those idle money returns to circulation.

some investors are keeping a close eye on a surge in the U.S. money supply for signs of inflation’s long-awaited return.

If I ever understand as little as 1% of what they’re talking about, I think they’re telling people to keep spending money, keep borrowing more money, keep taking more loan, and that will fix the inflation miraculously.

Economist and former Treasury official Nathan Sheets counters that if businesses aren’t inclined to spend, the larger money supply may do little to fan inflation.

The countries that are heavily relying on imports food are Mexico, Japan, S-Korea, Egypt. With the exception of China, the proportion of the globally imported food for most other countries is relatively small (usually less than 20%)..

With the Federal Reserve and Congress pushing stimulus efforts to new heights, some investors are keeping a close eye on a surge in the U.S. money supply for signs of inflation’s long-awaited return.
We have never observed money supply growth as high as it is today
With a litany of metrics showing rapid growth in the value of money waiting in banks and other liquid accounts, investors from Ray Dalio to Paul Tudor Jones have warned that the era of tepid price rises may be coming to an end.

“It’s fair to say we have never observed money supply growth as high as it is today,” Morgan Stanley chief U.S. equity strategist Mike Wilson wrote this week.

The “Fed may not be in control of Money Supply growth which means they won’t have control of inflation either, if it gets going,” he added.



There are several different ways economists measure the size of the U.S. money supply that are generally classified with the letter “M,” such as M0, M1 and M2.

The broad M2 measure includes cash, checking deposits, savings deposits and money market securities. Because of its wide definition, economists and investors tend to watch changes to the M2 supply as an indicator of the total money supply and future inflation.


As underscored by Wilson, the year-over-year percent change in the M2 supply is now north of 23%. To put that in perspective, year-over-year growth in the M2 money supply had never exceeded 15% until 2020, according to Fed records dating back to 1981.

Normally characterized by slow, steady growth, the M2 supply has grown 20% from $15.33 trillion at the end of 2019 to $18.3 trillion at the end of July.

“The risk of higher inflation may be greater than it’s ever been, too,” Wilson wrote. “While this hasn’t shown up in back end rates yet, the very sharp move higher in breakevens [bond market inflation expectations] and precious metals suggest higher inflation may be on its way.”

That seemed to be the opinion of longtime hedge fund manager Paul Tudor Jones, who in May said that his concerns over inflation and dollar depreciation prompted him to invest in both bitcoin and gold.



Though the differences between bitcoin and gold are many, Wall Street has for weeks chased both assets as hedges against inflation and a relatively safe place to keep wealth during a volatile year.

Gold, one of 2020′s best trades, on Wednesday burst through historic resistance at $2,000 an ounce to reach a new record. Between the Covid-19 pandemic and inflation expectations, gold has gained nearly 35% this year, far ahead of the S&P 500′s 3%.

“If you take cash, on the other hand, and you think about it from a purchasing power standpoint, if you own cash in the world today, you know your central bank has an avowed goal of depreciating its value 2% per year,” Jones said in May. “So you have, in essence, a wasting asset in your hands.”



The source of this M2 expansion and these inflation concerns isn’t necessarily a mystery.

Congress and the Fed have worked in tandem to combat the negative economic effects of Covid-19 with an unprecedented cocktail of fiscal spending, near-zero interest rates and subsidized loan programs.

Those efforts, largely designed to help businesses keep workers on payrolls and ease the impact of layoffs, have been applauded for keeping consumer spending afloat in recent months.

But between a prodigal Congress and an empowered Fed, critics argue that “printing money” to juice the economy could backfire and cause a spike in prices. Banks are still stuffed to the gills with reserves that could, in time, flow into the economy through credit and loans.

“Congress is now the critical player in driving money supply growth with the Fed fully committed to doing whatever it takes,” Wilson wrote. “This is very different from the post [financial crisis] era when aggressive monetary policy was unmet with a willing borrower and spender. We think this poses a greater likelihood for inflationary pressures to build.”


But while an expanded money supply may set the stage for inflation, the relationship between M2 and inflation has been debatable over the years. Some, like PGIM Fixed Income economist Nathan Sheets, said he’s taking a wait-and-see approach.

Sheets, who served in the U.S. Treasury Department until 2017, said investors were also worried about inflation in the aftermath of the financial crisis. Those fears, he said, ultimately did not come to fruition.

“Rates were very low and central bank balance sheets (and money creation) had surged. But the liquidity then sat in the banking system—including as excess reserves at the Fed,” he wrote in an email. “Money creation must translate into increased lending and spending in order for it to be inflationary.”

The idea that money creation won’t necessarily generate inflation is centered on yet another economics concept known as the velocity of money.

The velocity of money is, very simply, the rate at which money is exchanged in an economy. High money velocity is usually associated with a healthy economy with businesses and consumers spending money and adding to a country’s gross domestic product.

But the velocity of money can slow during recessions as corporations and families elect to save more of each dollar they earn. Demographic changes, such as an older population, also tend to curb the velocity of money.

According to Sheets, the Fed can go to extreme lengths to flush the economy with cash and bolster the M2 supply. But if businesses and customers aren’t inclined to spend the added dollars, the cash will almost invariably wind up sitting idle, not contributing to GDP or inflation.

That may be a partial explanation as to why the U.S. hasn’t seen headline inflation numbers increase despite the rise in M2 supply in recent months.

The Labor Department’s latest report on core consumer prices showed the index down for a third consecutive month in June for the first time since 1957. The core personal consumption expenditures price index, the Fed’s preferred inflation gauge, increase 0.9% on a year-over-year basis in June, the smallest advance since December 2010.

“Inflation has been held down by some deep structural factors, including aging demographics and high debt levels — which have restrained aggregate demand and pressures on prices,” Sheets wrote in an email. “Workers have struggled to get higher wages, and firms — competing against the so-called ‘Amazon price’ — have had little capacity to raise their prices.”

“My expectation is that these forces are likely to continue on the other side of the virus,” Sheets wrote. “In response, central banks will remain highly stimulative, but hitting 2% inflation targets on a sustained basis is going to be a challenge.”

https://www.cnbc.com/2020/08/05/the-ballooning-money-supply-may-be-the-key-to-unlocking-inflation-in-the-us.html

“Rates were very low and central bank balance sheets (and money creation) had surged. But the liquidity then sat in the banking system—including as excess reserves at the Fed,” he wrote in an email. “Money creation must translate into increased lending and spending in order for it to be inflationary.”