US: The Money Supply Continues its Biggest Collapse Since the Great Depression

[Emily]

https://research.stlouisfed.org/publications/economic-synopses/2023/05/25/the-rise-and-fall-of-m2
2023, No. 11
Posted 2023-05-23

The Rise and Fall of M2
by Christopher J. Neely

M2 is a broad measure of the money supply, including currency and various sorts of bank and money market mutual fund deposits that are relatively liquid. Figure 1 shows that the year-over-year growth rate of M2 has behaved very unusually since February 2020: M2 grew at record rates during the COVID-19 pandemic from February 2020 through 2022 but has declined at record rates since late 2022. The 26.9% rate of year-over-year growth in February 2021 easily exceeds the rates of growth during either the quantitative easing programs of 2008-15 or the inflations of the 1970s and 1980s.[SUP]1[/SUP] At the same time, the current negative rates of growth are also unprecedented: There has been no other month of year-over-year decline in M2 since at least 1959.
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Finally, it is worth noting that huge growth in the monetary base in 2008-15 did not spark unusual growth in M2 or inflation during that period (Figure 3). This occurred because banks essentially swapped bonds for reserves held at the Federal Reserve. That is, banks chose to hold much of the increase in the base as excess reserves with the Federal Reserve...



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[Emily]

https://mises.org/wire/money-supply-continues-its-biggest-collapse-great-depression
The Money Supply Continues its Biggest Collapse Since the Great Depression
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12/05/2023
Ryan McMaken
Money supply growth fell again in October, remaining deep in negative territory after turning negative in November 2022 for the first time in twenty-eight years. October's drop continues a steep downward trend from the unprecedented highs experienced during much of the past two years.
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These factors all point toward a bubble that is in the process of popping. The situation is unsustainable, yet the Fed cannot change course without reigniting a new surge in price inflation. Although some professional economists insist that price inflation has all but disappeared, the sentiment on the ground is clearly one in which most workers believe their wages are not keeping up with rising prices. Any surge in prices would be especially problematic given the rising cost of living. Ordinary Americans face a similar problem with home prices. According to the Atlanta Fed, the housing affordability index is now the worst it's been since 2006, in the midst of the Housing Bubble.

If the Fed reverses course now, and embraces a new flood of new money, prices will only spiral upward. It didn't have to be this way, but ordinary people are now paying the price for a decade of easy money cheered by Wall Street and the profligates in Washington. The only way to put the economy on a more stable long-term path is for the Fed to stop pumping new money into the economy. That means a falling money supply and popping economic bubbles. But it also lays the groundwork for a real economy—i.e., an economy not built on endless bubbles—built by saving and investment rather than spending made possible by artificially low interest rates and easy money.
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[sharon sanders]

I agree.