Posted on 01/27/2022 8:23:48 AM PST by Vermont Lt
Further, the deleveraging of the consumer has the effect of lowering money supply (Dr DDA accounts, Cr loans) so in many ways, the consumer is in great shape for the most part.
The inflation we are seeing is likely a result of scarcity, not too much money.
Now, when that M2 gets deployed...
....and that money may be parked as a security cushion for people expecting to get canned because they resist the vaxx mandates.
“Just because they printed all this money, why are prices going up.”
Well, you understand supply and demand right? It applies to money as well as goods and services. So if you print more money, all else being equal, then all the money in circulation is automatically worth less, since you have increased the supply of money without increasing the demand. When that money is worth less, the prices have to go up because you need more of this devalued money to match the value of the products you want to buy.
The exception to this is when the productivity of the economy is also increasing. That’s essentially the same as saying the demand for money is rising. In that case, you can print a certain amount of money without causing inflation. That’s obviously not the case in an economic downturn like we have right now.
“M1 was redefined to include savings account”
You really think that explains it? Who keeps money in savings accounts nowadays when they literally pay zero interest? My bank doesn’t even offer savings accounts anymore, they automatically transferred my whole balance into a checking account because the service is obsolete and has been for over a decade now.
I am being obtuse. Of course when you print money prices go up [modulo quantity of goods and velocity of money]. I am just mocking the FED that doesn’t understand that.
Before May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other checkable deposits (OCDs), consisting of negotiable order of withdrawal, or NOW, and automatic transfer service, or ATS, accounts at depository institutions, share draft accounts at credit unions, and demand deposits at thrift institutions.
Beginning May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other liquid deposits, consisting of OCDs and savings deposits (including money market deposit accounts). Seasonally adjusted M1 is constructed by summing currency, demand deposits, and OCDs (before May 2020) or other liquid deposits (beginning May 2020), each seasonally adjusted separately.
Further, if the equivalent of $36,364 per 330MM Americans materialized overnight, we'd see it.
What explains everything is the expansion of "money" which includes BTW whatever debt the private sector is willing to create.
But even as we see exploding prices and exploding money supply there is the "nothing to see here crowd."
The issue isn't a psychological one. I can pretend that food costs didn't just go up 40% or some such and try to change nothing in my life, but when I look at how much of my money is left over at the end of the month to go towards the down payment on the car that I can't buy because the supply chain is jammed up, I find I have much less than I was planning on, so whoops there goes the new car. So I wander across the street and discover I can't get used car either. So I go buy myself a bicycle and discover the price of that just skyrockted as well. It's a real and pervasive and not going to go away. You can look the other way when a truck is bearing down on you as you cross the road. You are still dead when it hits you.
“Further, if the equivalent of $36,364 per 330MM Americans materialized overnight...”
Well that settles it. It can’t be savings accounts because that’s far too much savings for the average American, who is actually in debt :)
I agree it looks suspect, but in this case I'm on board with the footnote.
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