Speculative manias are in the air, as evidenced by the recent price surges for bitcoin, a digital asset with a fundamental value of zero, and GameStop , a declining retailer. Along with the other economic trends—a strong recovery, surging commodity prices and an uptick in inflation—those asset bubbles have a clear cause: the massive expansion of money and credit.
Yet America’s fiscal and monetary masters are turning a blind eye. They are focused solely on mending the labor market. With the fervor of messiahs, Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen tell us the only way to save the labor market and reach full employment is to continue to pour fiscal and monetary fuel on the fire. But their prescriptions and prophecies, modeled on the playbook of the 2008 financial crisis, are not valid today.
After that crisis, the Fed began quantitative easing, which massively expanded its balance sheet. At the same time, commercial banks were busy shrinking their loan books and writing off losses from mortgage debt and securities, which meant the Fed’s injections did little more than offset the contraction of commercial bank balance sheets. As a result, money growth from 2010-19, as measured by the Fed’s broadest money measure, M2, averaged only 5.8% a year.
While money on the Fed’s books grew rapidly, money in the hands of the public grew slowly. Spending and inflation were restrained, and the postcrisis recovery was anemic with inflation persistently below the Fed’s target. In contrast, China’s money-supply growth exploded in 2009 and 2010, averaging 23% a year. China achieved a strong recovery as a result, but also a jump in inflation, which moved from minus 1.8% in July 2009 to 6.5% by July 2011. Money matters.
Fast-forward to February 2020. Since then, the quantity of money in the U.S. economy, measured by M2, has increased by an astonishing $4 trillion. That’s a one-year increase of 26%—the largest annual percentage increase since 1943.
opinion steve_hanke I wish I could meet those characters in the comic strip so I can tell them ther money sending a lot of people to hell -🔥🔥🔥🔥🔥🔥🔥
opinion steve_hanke . Nothing to see here .
opinion steve_hanke Various WSJ editorials since 2008 have incorrectly warned of impending inflation. The thing that matters is money in circulation. Excess bank reserves don’t qualify. And don’t pretend that in a post Dodd-Frank world that money is flying off the shelves.
opinion steve_hanke and it all went to people who didn't need it while the rest of us struggled to pay rent
opinion steve_hanke Thanks Trump.
opinion steve_hanke Congratulations! This is a real financial success!)))))
opinion steve_hanke Can't speak for anybody else, but I'm not going to throw the surplus away buying houses & stuff; just going to improve my investment portfolio. How about you?
opinion steve_hanke Blaming GME/Bitcoin mania on M2 growth. There may be points in this editorial, but what a laughable opening.
opinion steve_hanke Shitttt where The Poor haven’t seen it! Do y’all have normal journalists on staff u know come from bottoms
opinion steve_hanke 'Velocity of M2 Money Stock (M2V) | FRED | St. Louis Fed'
opinion steve_hanke There is going major crash in the market soon. 30-40% dip. I’m already repositioning my portfolio. Limiting exposure to risky assets and took profits off the table. Will reinvest and buy the market dip once the inevitable eventually happens.
steve_hanke opinion That money didn’t make it into M2.
opinion steve_hanke And most of that money belongs to 5 dudes...
opinion steve_hanke An oversupply of a commodity cheapens the value of that commodity.
opinion steve_hanke NewsAsset
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