What other money stock measurements are you looking at and what in those charts and M2 should we be looking at for a sign of danger?
Are the monetary authorities conducting a real-time experiment on the money supply?
Let’s take a quick look at the changes to the money stock and savings measures in the wake of covid. This provides us with a glimpse into what caused this demand-pull inflation as it essentially encouraged the consumer to undervalue their money and chase the fewer goods available. Perhaps it can also provide us with a glimpse into what lies ahead for the markets and economy. Given how the covid stimulus was handed out and what it entailed, I feel that we need to include personal savings measures as well. If these numbers shrink and fall below trend, this could be a catalyst for money stock growth to fade or even decline on an outright basis.
Source: Money Stock Measures – H.6 Release (May 24, 2022), Federal Reserve
The main point of my argument against the covid monetary and fiscal responses rested in the way the funds were dispensed. Let’s take a look at what happened to M1 and M2 money stock measures of the United States Fed in the wake of the covid monetary response.
These values are in billions of USD; Notice the declines in both M1 & M2 last month. It has been a long time since this happened. Is this the start of a trend reversal?
If the three money measures in the chart above begin to decline in a meaningful way, we need to contemplate a possible price reversion for the asset classes.