> There's an important message here: the money expands by that much and inflation is .. 4%?
I doubt this comment will age well. Macroeconomic effects don't happen instantly.
I doubt this comment will age well. Macroeconomic effects don't happen instantly.
(Because banks also control credit supply and only give it to creditworthy borrowers... The Fed can drop rates to zero and give banks limitless money and they still won't lend it out to deadbeats.)
Printing money and sending it to people does. Refer to the chart below.
https://www.federalreserve.gov/releases/h6/current/default.h...
Also in a lot of ways M2 on its own is meaningless (money sitting under a mattress not being used doesn’t affect the economy) - velocity of money is more useful. Of course, inflation is complex and multicausal so this isn’t the whole picture, but it’s more useful than raw M2 supply.
If I have $1k under the mattress I probably won't risk $100 on a share of CORP. If I have $100k under a mattress, I'm more willing to take a swing.
>Printing money and sending it to people does.
That money wasn't printed, it was borrowed because the Fed cannot do that. Only the US government can do that. The Fed may have bought treasury bonds but those still have to be paid back.
Do you mean that when securities owned by the Fed mature, the Fed will destroy the money that it had created to buy them?
In practice, I don't think that has really been happening. They have just been reinvesting proceeds in new securities (at least the principal; they send some (all?) interest to the Treasury).
This may change at some point, but so far the Fed has periodically increased its balance sheet while never substantially reducing it [1]. If that continues long term, the Fed's "temporary" money is effectively permanent.
That is new money. Trillions of it.
It's been maddening watching economists whom I respect making proclamations (one way or the other) with high degrees of confidence that inflation is or isn't a problem. They have no idea, because anyone who actually knows what they are doing knows that there isn't enough data yet.