M2 Money Stock - Why Inflation is going to Hit.. Hard

To all those saying that inflation isn’t going to be a big deal… look at the below:

or on a 5 year scale:

M2 Money Stock consists of M1 plus (1) small-denomination time deposits (time deposits in amounts of less than $100,000) less IRA and Keogh balances at depository institutions; and (2) balances in retail MMFs less IRA and Keogh balances at MMFs… in other words all of the liquid currency in existence at any one point in time.

In Feb 2020, it stood at $15.4 trillion, in Mar 2020 it had expanded to $19.9 trillion - a 30% increase in the amount of money. Sadly… I think that the nation in is for a rude lesson in the laws of supply and demand with too many dollars chasing too few goods. #inflationtothemoon

If you want another way of looking at the injection of cash relative to past increases, here is the percent change on a per year basis (blue). Notice the high amounts in the 70’s… when inflation roared (red).

And finally… this graph will update live as it happens…

Source: St. Louis Federal Reserve - M2 Money Stock (M2NS) | FRED | St. Louis Fed

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Great breakdown. Can see it hitting 3% again. Not sure if it will go above that.

Why only 3%?

I just don’t see how so much cash can be dumped into the economy… and not have a giant impact. Usually the effects of inflation can be offset by gains in productivity (people working more efficiently) over time, but hard to imagine everyone coming back to their jobs will output 30% more this year than last.

That means you have a $130 dollars chasing what used to be a $100 dollar purchase… suppliers would be crazy not to raise prices if demand is constant at both levels.

Did a quick average … However 1973 - 1983 … scary high inflation numbers. We may be trending in that direction, which I hope does not happen.

Yea, I think the last 40 years since that has lulled us into a false sense of security. There are obviously competing things that can influence it… but look at this chart and see how in the 70s the increase in the blue line (money supply) preceded spikes of inflation. Then look at the relative size of the recent gush of cash…