Remember that an increase in M1 doesn't mean "more money for everyone"! It just means more reserves for banks.<p>I think the key thing here is to look at is increase of bank deposits (I.e. money for you and me). That is M2 MINUS central bank reserves and notes and coins in circulation. If you look at this you'll see that bank deposits have only increased modestly despite the large increase in M1. From this you can infer that the FED's "money printing" isn't really affecting Main Street very much. I.e. currently not causing much inflation.<p>What's happening? The FED is creating new reserves and using those to buy bonds. The reserves remain in financial institutions and should incentivise banks to lend - or at least that is the theory. Lending is how bank deposits (money for you and me) are created. The reserves which the FED creates to buy bonds (which are assets of commercial banks) doesn't end up in people's Bank accounts (which are liabilities of commercial banks). Instead, the reserves remain sloshing around in the banks.<p>My view is that money supply is endogenous. That is, new bank deposits are created when new loans are made. Currently, there is not a demand for loans so there won't be a huge increase in the M2 money supply as a result of these FED bond purchases. Perhaps demand might increase in the future, in which case the US will see inflation. I suspect once the economy recovers and inflation (as measured by the FED) increases then they'll start performing open market operations to sell the bonds they bought and thus remove the excess reserves from the financial system.
Hey HN Friends,<p>I'm posting this because I was shocked when I saw this graph. I hadn't previously appreciated just how much of an unprecedented explosion in the money supply there'd been this year.<p>In particular, it seems to quantify a <i>lot</i> of potential for long run inflation and a very expansionary monetary policy move required to prop up the economy during the pandemic. But I'm not an expert here; I'm hoping we can put our heads together. I'd be very curious to hear general discussion and insights into the dynamics. Let's go, community of systems thinkers :)<p>While the M1 measure of money shows the change most dramatically, other ways of looking at the same data (dollars printed, M2, MZM, etc.) seem to tell the same story. There have also been some news articles written, but I thought that for HN, we'd go directly to the numbers.<p>Thanks for taking a look!
The FRED® Blog
What’s behind the recent surge in the M1 money supply?
<a href="https://fredblog.stlouisfed.org/2021/01/whats-behind-the-recent-surge-in-the-m1-money-supply/?utm_source=series_page&utm_medium=related_content&utm_term=related_resources&utm_campaign=fredblog" rel="nofollow">https://fredblog.stlouisfed.org/2021/01/whats-behind-the-rec...</a>
Kings used to coin money, hand it out to the army and then collect taxes from the entire population that was paid in the same coin.<p>The Fed creates dollars, hands it out to bankers and then the US gov't collects taxes from the entire population in the same dollars.<p>Same strategy, different masters.
Looks like the bitcoin comment got killed, but I want to revive an interesting point at the heart of it:<p>Big monetary swings like this do bolster the case for it as an inflation-resistant value store...like gold (or stocks), both of which have risen quite a bit this year.