Money Supply Growth Reaches 34-Month High Amidst Economic Uncertainty, Fueled by Shift in Federal Reserve Policy
WASHINGTON D.C. - The total money supply (TMS) has surged to a 34-month high, topping $22.2 trillion, even as economic indicators signal growing weakness. This unexpected growth, detailed in recent analysis, comes as the Federal Reserve subtly shifts away from its previously stated “restrictive” monetary policy.
since 2009, the TMS has increased by over 200 percent - a significantly larger expansion than the nearly 160 percent growth seen in M2 over the same period. Notably, almost 29 percent of the current $20 trillion money supply has been created as January 2020, and over two-thirds of all money in circulation today was created in the wake of the 2008 Great Recession – exceeding $13 trillion.This rapid expansion is occurring despite a backdrop of rising layoffs and increasing business bankruptcies, raising questions about the Fed’s approach to managing the economy.
The surge in money supply growth is notably surprising given recent economic headwinds. U.S. layoffs in October climbed to a two-month high, according to data from Challenger, Gray & Christmas, Inc. Bloomberg reports that “Mom-and-Pop Business Bankruptcies Hit a Record as Debts Rise,” and recent private payroll numbers from ADP indicate further job losses. These factors typically exert downward pressure on money supply growth.
Though, the Federal reserve’s actions – lowering the target federal funds rate in September and slowing the pace of quantitative tightening throughout much of the year – appear to be counteracting these pressures. Analysts suggest this return to accommodative monetary policy is aimed at bolstering asset prices and offsetting economic stagnation, despite public statements suggesting a continued commitment to tighter monetary conditions.This policy shift is widely believed to be a key driver behind the recent resurgence in money supply growth.
