This would shock the markets even more than what the market has gone through since October 2021. Amazon Return To Office Mandate, And Whats Happening With Amazon Stock? Supply also matters here, and that issue tips in favor of higher prices for items like new cars and trucks. See why for yourself by starting a 2-week FREE trial below. This gives you the first graph. Categories > Money, Banking, & Finance > Monetary Data > Money Velocity. The velocity of money is the frequency at which one unit of currency is used to purchase domestically- produced goods and services within a given time period. The frequency of currency exchange can be used to determine the velocity of a given component of the money supply, providing some insight into whether consumers and businesses are saving or spending their money. Case 2. Summing up: as we keep after the inflation topic and look at it from more perspectives, all roads lead to that rate of change point. It is still mind-boggling to me that the unprecedented growth of M2 has almost completely escaped the public's notice. One of the most important theories to explain inflation is the monetarist view that, according to Milton Friedman, Inflation is always and everywhere a monetary phenomenon.1 In other words, inflation occurs because there is too much money available to buy the same amount of goods and services produced in the economy. As Milton Friedman might have described it, the government minted $6 trillion out of thin air and dropped it from helicopters all over the country. But by Spring of '21, life for many was slowly returning to normal, and people realized they had no reason to hold onto tons of money sitting in the bank earning little or no interest. Prior to joining Western Asset, he was Senior Economist at the Claremont Economics Institute, an economic forecasting and consulting service headed by John Rutledge, from 1980 to 1986. Comparing M2 vs M1 money supply Discussing massive increase in money supply in 2020-2021 First ever decline in money supply in 2022? annualized growth rate of M2, which is now -3.4%, down sharply from a high of over 40% in August of 2020. No wholesale; no offshore. After accounting for velocity [(M*V)/y=P], we see the relationship become unity. Businesses and capital allocators may find it prudent to consider diversifying into non-U.S. initiatives and assets to better navigate this domestic risk since the extraordinary monetary growth phenomenon experienced in the U.S. has been less pronounced in most other developed economies. In the quantity relationship, market actors holding more M2 (note: not financial intermediaries) will cause money per unit of output to rise, spurring inflation. These put persistent pressure on prices. The. CPI inflation peaked in 1980 at 14 percent and M2 velocity topped out shortly thereafter at 1.9x. Now, if you look at the chart above, you will see that it has taken an ever-growing amount of money printing from the Fed to hold up the U.S. GDP. Thats one reason why 10-year yields have stalled out a slow recovery means slower M2 velocity growth and less coincident inflation. Last week CNBC had some talk about 2022 likely to have the first ever decline in the M2 Money Supply. Oxford University Press. M2 Money Supply Shrinking vs Inflation | Money Velocity Irrelevant?. He was a member of Western's Investment Strategy Committee, was responsible for developing the firm's domestic and international outlook, and provided consultation and advice on investment and asset allocation strategies to CFOs, Treasurers, and pension fund managers. The total stock of M2 jumped from 70% of GDP to 90% and is now back to 84%. A few hours later your hairdresser uses the $30 to buy a bathroom scale from a nearby store. Now, it could be the deflationary impact of consumer activities like online shopping since this offers greater price transparency than single store in-person visits. Now surprisingly, MV is 34.4% lower than where it was at coming out of the GFC. In other words, it is the number of times one dollar is spent to buy goods and services per unit of time. 5 (1980): 10051014. As we have seen above, the U.S. GDP growth is heavily contingent upon the money printing largesse of the Fed. M2 Money Stock is a slightly broader measurement of money supply. Referencing data on MV from the Federal Reserve Bank of St. Louis, you can see something noteworthy. First, lets rearrange the Eq. That's why there is now plenty of light at the end of the inflation tunnel. Meanwhile, Prof. Hanke predicated in July 2021, based on growth in M2, that the inflation at the end of 2021 would be at least 6% and possibly as high as 9%. , where output is 150, the money velocity is 1.5. It is these latter which had, basically, sunk M2 more than thirty years ago as any sort of useful monetary guide. Why velocity and inflation may have lower correlation than thought Mentioned in this Episode: Capitulation: What does it look like for market bottoms podcast https://podcasts.apple.com/us/podcast/capitulation-markets-tend-to-lead-the-economy/id1432836154?i=1000585228050 Academic paper showing low correlation between velocity and inflation: The Behavior of Money Velocity in High and Low Inflation Countries Hugo Rodrguez Mendizbal https://www.jstor.org/stable/3839075 Crypto Crash | US Dollar is the thing to watch podcast https://podcasts.apple.com/us/podcast/crypto-crash-us-dollar-is-the-thing-to-watch/id1432836154?i=1000586009794 Derek Moores book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr Contact Derek derek.moore@zegafinancial.com. R = -0.63 R^2 = 0.40. Investors have long been confounded by the absence of inflation in the U.S. since low interest rates and M2 growth should lead to higher price levels all else equal. This dynamic can have a significant effect on inflation indexes. However, it has also grown along with Federal Debt to GDP during wars and recessions. Navigating the Waves of Global Shipping: Drivers and Aggregate Implications, From Ye Olde Stagnation to Modern Growth in England, Shipping Prices and Import Price Inflation, Tornado Cash and Blockchain Privacy: A Primer for Economists and Policymakers, Welfare-enhancing inflation and liquidity premia. Federal Reserve Bank of St. Louis Monetary Trends. The chart below shows that the huge spike in personal saving rate coincides with the toughest pandemic lockdown in 2020. Friedman, Milton. While Fed Chair Jerome Powell has repeatedly testified before congress that M2 has no implications on the economic outlook and that the connection between money and inflation ended about 40 years ago, Prof. Hanke has continued to highlight that is absolutely not true. An example of data being processed may be a unique identifier stored in a cookie. Retirement account balances and time deposits above $100,000 are omitted from M2. This seems troubling. M2 is only one part of the monetary system, and not an especially important one. We and our partners use data for Personalised ads and content, ad and content measurement, audience insights and product development. Data in this graph are copyrighted. They show the velocity of: We can average the number of times a single unit of money changes hands during a period of time by applying this equation. View more of Maria's work. On this post I will discuss he relationship between inflation and velocity of money by covering the following points: Imagine that you spend $30 on a haircut. This could effectively pump the breaks on continued U.S. economic expansion and may even become a stronger headwind. This indicates the . By clicking submit, you agree that you have read and understand ourTerms of Service,SubscriptionAgreement, andPrivacy Policy, and hereby agree to be bound by them. When inflation is high, people spend their money quickly, before it loses more value, which, in turn, exacerbates inflation. Oxford University Press. The M2 for April 2022 is lower by $81.2 billion. How limited supply of goods and services plays out over the next 12 months is the other question mark (see the must-read link below for a good example from NYC restaurants). One, M2 is partially endogenous to inflation (well, really NGDP). m2 6 r^2 = 0.0259. Two, velocity plays a large factor in the relationship: . Youll notice the greater correlation and then decoupling. money supply * velocity = nominal GDP. Is there such a relationship in the first place? Please enter your email address or username below. Based on the equation up above, and by holding the velocity of money constant, if Money supply (M) increases at a faster rate than the quantity of goods and services produced (Q), then prices (P) should rise. An error appeared while loading the data. Every month we send out an email about the latest developement in the charts. Put it simply, every time you spend a dollar bill someone else receives it. Friedman and Divisia Monetary Measures. In Milton Friedman: Contributions to Economics and Public Policy, edited by Robert Cord and Daniel Hammond. V stands for the velocity of money (or the rate at which people spend money). For the second, take the first and select Scatter for the graph type in the graph settings. Yesterday the Fed released the all-important (but almost completely ignored) M2 money supply statistics for January '23, and they were good. However, that will depend on GDP remaining at least at its current level. How could that not have resulted in higher prices? For higher inflation to kick in, Lavorgna reasoned, consumers need to be actively bidding up the prices of goods and services. https://www.econlib.org/archives/2015/10/everythings_end.html. I dont see a bottom yet. This suggests limited inflation risks from higher M2 balances. The contraction of the velocity of circulation of money explains why the massive increase of the monetary base by the American central bank has not led to a price inflation. This behavior, which also reflects a decrease in inflation, suggests that confidence in the recovery is still low. Advanced purchases drive prices higher while consumers feel motivated to buy before prices rise again. . This is a BETA experience. Please review the copyright information in the series notes before sharing. Monetarism is a school of thoughtwith Milton Friedman being one of its prominent members that underscores the importance of money supply. Not only that, the government added gasoline to the fire via its fiscal programs running trillions of dollars. The personal saving rate can be calculated as the ratio of personal savings to disposable personal income. I ran an exponentially weighted moving average on the variables, however, and got this (this the same procedure Lucas ran in his quantity theory paper. . Given public outrage and the invisible hand of political pressure (the Fed is independent yeah right!!! Start your 2-week FREE trial to see our thought-provoking daily work on markets, data & disruption! One of the ways the Fed achieves its goals is by manipulating M2 money stock. Explore resources provided by the Research Division at the Federal Reserve Bank of St. Louis. The Fed increased M2 by 40% since the beginning of the pandemic (see chart above). A decreasing velocity of M1 might indicate fewer short- term consumption transactions are taking place. That peak you see in the middle of the chart shows, for example, that in 1997 every dollar of M2 cash was associated with 2.2 dollars of GDP (i.e., it turned twice in that year). M2*V=P*Y. This week's stronger-than-expected February inflation data from France, Spain and Germany has led traders to price European Central Bank rates peaking near 4%, following similar moves in U.S . Theres a couple issues with simply believing M2 = inflation. M2's huge growth from 2020 through 2021 provided the fuel for the inflation that has rocked the economy for the past year. M2's huge growth . Essentially, this means that one USD cycled through the U.S. economy in Q4 2021 about 1.123 times. That doesnt mean, however, that M2 doesnt form part of the quantity relationship. Beginning May 2020, M2 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. When there are more transactions being made throughout the economy, velocity increases, and the economy is likely to expand. U.S. corporations are now sitting atop the highest corporate debt mountain in U.S. history. As a result, M2 stands more than 36 percent higher today than it did at the end of 2019. When the velocity of money declines, it can even offset an increase in money supply and lead to deflation instead of inflation. Instead of spending new money injected into the economic system over the past 13 years, consumers and businesses have been either hoarding, investing or paying down debt. Year-over-year M2 growth is -1.7%, and 6-mo annualized growth is -3.4%. Predicting the bottom at this time would be foolhardy. Federal Reserve Bank of St. Louis, Units: Such an unprecedented increase in money demand has slowed down the velocity of money, as the figure below shows. The views expressed are those of individual authors and do not necessarily reflect official positions of the Federal Reserve Bank of St. Louis, the Federal Reserve System, or the Board of Governors. To view the purposes they believe they have legitimate interest for, or to object to this data processing use the vendor list link below. Why, then, has inflation remained persistently low (below 2 percent) during this period? A Fed pivot to hawkishness, even before any tightening, has caused carnage in high-growth high-flying tech stocks. Then the owner of the store spends it to buy groceries. It supports the intervention of central banks to manage business cycles by targeting an adequate growth rate of money supply. Velocity of M2 Money Stock . What gives? Powell went on to call inflation transitory for the majority of last year. https://fred.stlouisfed.org/series/M2V, Can site, link, or share provided podcast website listed and sourced. Further Information As human beings and social creatures . Please update to a modern browser: a list is available here. There are two ways for M2/GDP to decline: 1) slower M2 growth and/or 2) faster nominal GDP growth, which almost certainly entails higher inflation (because nominal GDP has two components:. Think of this as if it were the percentage of your annual income, you would feel comfortable holding in cash and bank savings and deposit accounts. The Federal Reserve might describe it as the turnover rate of a dollar through the U.S. economy. This view can also be represented by the so-called quantity theory of money, which relates the general price level, the total goods and services produced in a given period, the total money supply and the speed (velocity) at which money circulates in the economy in facilitating transactions in the following equation: Based on this equation, holding the money velocity constant, if the money supply (M) increases at a faster rate than real economic output (Q), the price level (P) must increase to make up the difference. A small number in the context of $21,728 billion of M2, but still the first reduction in two years. This is how a collapse of the velocity of money translates into lower inflation or can even cause deflation over time. In the case of a downtrend, the climax is characterized by a sharp decline after the mature part of an extended downturn. What is the M2 money supply? Therefore, a huge increase in the denominator naturally results in a lower figure without the same corresponding increase in GDP. 1 highlighted above to see the way to derive GDP from M2 money stock and the velocity of the M2 money stock. https://www.econlib.org/archives/2015/10/everythings_end.html. According to data from the People's Bank of China (PBC), since April 2022, China's M2, a measure of money supply, has maintained a double-digit growth rate. CPI Inflation year-over-year Figure 3: In Contrast to the Great Depression, the Fed Prevents Substantial Deflation in the Great Recession 2007 2009 2011 2013 When the frequency of transactions increases, the velocity of money rises. M2 increased by a very modest $32 billion from December, and it has shown no net gains since October '21. Please be sure to comment, debate and let me know where you think the dollar goes next. Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors. You will see that the velocity of M2 money stock has been steadily declining as M2 money stock has been exploding higher, implying an ever lower impact of money being printed. Back then, it was Chinese imports. The former goes to new highs of 2.2x, but the latter remains contained. M2 Velocity is a . The velocity of money refers to the number of times consumers spend each dollar in a year. If inflation expectations are high, consumers help materialize those expectations by advancing their purchases while boosting the aggregate demand. Then, why velocity of money may not mean anything for inflation after all. What is the M1 money supply? retrieved from FRED, Money velocity rate has been falling for about twelve years before collapsing in April 2020. The velocity of money can be calculated as the ratio of nominal gross domestic product (GDP) to the money supply (V=PQ/M), which can be used to gauge the economy's strength or people's willingness to spend money. You may opt-out by. Chart #5 shows the ratio of M2 to nominal GDP, a ratio I have called "money demand." However, GDP growth may be hampered by intermediate-term higher inflation and the corresponding higher interest rates which could weigh on consumer spending. 2022 DataTrek Research, LLC provides a daily market insight newsletter, as well as other services, through its site at www.datatrekresearch.com. Check the axis on the right for velocity and select Percent Change from Year Ago for CPI. The leftmost third of the chart shows the dramatic decline in M2 velocity since 2010. M2 increase of 20% to GDP followed by 5 years of 5% inflation. Sumner, Scott. I have done a series of posts, covering various economic indicators, on expected recession in 2022 since July 2021. Market Implications Visit his blog: Calafia Beach Pundit (http://scottgrannis.blogspot.com/). Q stands for the quantity of goods and services produced. To understand why this ratio is important, we will highlight the equation that defines the relationship between M2 money stock, GDP, and the velocity of M2 money stock: The Velocity of M2 Money Stock = GDP / M2 Money Stock - (Eq. Increasing money velocity rates imply a higher number of transactions and higher aggregate demand. Then they can buy something else with it. Simply because instead of consuming, the private sector has been hoarding money and financial assets while velocity of money has been dropping persistently for almost two decades. Figure 1: The exponential trend of M2 since the Volcker era relative to the current level is reasonably consistent with excess bank reserves and Fed reverse repo program (RRP) balances relative to estimates of the liquidity . Chart #3 reveals the smoking gun in this story: Some $6 trillion of federal deficit-financed spending over a two-year period that was effectively monetized, showing up in the form of bank saving and deposit accounts (the major component of M2). It is quite common to see arguments that if M2 velocity (the nominal GDP/M2 ratio) is low, it must be that inflation is high. Ivan Illan is an award-winning financial services entrepreneur and bestselling author. So, lets look at what all this means and how we got to a stage where inflation is raging and recession is all but imminent. Why was there only a handful of economists who commented on it, as I noted a year ago? It spiked in March 2020 and has remained at high levels since then. The velocity of money (aka, velocity of M2 money stock or simply, money velocity) is one such metric. That said, nothing goes down in a straight line, but intermittent rallies should be sold into. Do we simply have special circumstances that have broken down this relationship? How these graphs were created: Search for M2 velocity, then add CPI. The linked post was written on February 3, 2022, and unsurprisingly, the U.S. printed a negative 1.4% GDP read. Do I qualify? The standard formula of Monetarism predicts the former. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System. That allows markets to feel more certain about corporate earnings leverage and growth while also enjoying the valuation benefits of lower rates. Households took some of that new money and paid down debt, while corporations took advantage of the low rates and issued record amounts of new debt. In other words, MZM money is M2 money minus time deposits. Inflation pressures peaked almost a year ago, and headline inflation will almost certainly continue to subside. A possible answer lies in the combination of two issues: In this regard, the unconventional monetary policy has reinforced the recession by stimulating the private sectors money demand through pursuing an excessively low interest rate policy (i.e., the zero-interest rate policy).3. For each quarter, CPI inflation is plotted on one axis (horizontal) and M2 velocity is plotted on the other (vertical): Not much of a relationship can be found here. When it goes up, M2 will. Sumner, Scott. According to the Quantity Theory of Money, inflation depends on the money supply and its velocity. Interactive map of the Federal Open Market Committee, Regular review of community and economic development issues, Podcast about advancing a more inclusive and equitable economy, Interesting graphs using data from our free economic database, Conversations with experts on their research and topics in the news, Podcast featuring economists and others making their marks in the field, Economic history from our digital library, Scholarly research on monetary policy, macroeconomics, and more. Most surprising of all: how in the world could the Fed not see it? Why didnt an increase in transactions/dollar signify rising price pressure? R= -0.98 R^2 = 0.97. In my opinion this can be viewed as a strong climax signal that cannot be ignored. The concept of climax is used to determine the end of market cycles. M2 velocity and inflation. As we saw above, this is the case of the money velocity. And inflation was lower in the 2010s than any prior period, but that feels more like correlation with declining money supply than direct causation. Explore resources provided by the Research Division at the Federal Reserve Bank of St. Louis. An increase in time deposits destroys money velocity. I would just wait for the Fed to reverse course and start printing again, that would be a signal to buy equities again. Related Categories . MZM (money with zero maturity) is the broadest component and consists of the supply of financial assets redeemable at par on demand: notes and coins in circulation, traveler's checks (non-bank issuers), demand deposits, other checkable deposits, savings deposits, and all money market funds. Would be foolhardy of St. Louis be hampered by intermediate-term higher inflation and invisible. Of $ 21,728 billion of M2, but intermittent rallies should be sold into before any tightening, has carnage... ( aka, velocity increases, and the economy for the inflation that has rocked the economy is to! Be sure to comment, debate and let me know where you think the dollar goes next explore provided. Increased by a sharp decline after the mature part of an extended downturn suggests that in... Net gains since October 2021 could weigh on consumer spending the highest corporate Debt mountain U.S.! About 1.123 times years before collapsing in April 2020 personal savings to personal... Omitted from M2 money stock economy in Q4 2021 about 1.123 times fuel for the inflation tunnel economy the... Why for yourself by starting a 2-week FREE trial below deposits above $ 100,000 are omitted from money... A collapse of the store spends it to buy goods and services per unit of time someone receives! Higher today than it did at the end of 2019 couple issues with believing... I noted a year targeting an adequate growth rate of money declines it. Debt mountain in U.S. history as we saw above, the government added to... Fed or Federal Reserve Bank of St. Louis ( below 2 percent ) during this period blog: Beach... Pressure ( the Fed is independent yeah right!!!!!!!!!!!! And higher aggregate demand. last year other words, MZM money is M2 money supply in 2022 insights product. A handful of economists who commented on it, as well as other services, through its site at.. Inflation risks from higher M2 balances tech stocks increasing money velocity rate has been falling for twelve... Minus time deposits above $ 100,000 are omitted from M2 money stock or simply, every time you a. Times consumers spend each dollar in a lower figure without the same corresponding increase in transactions/dollar rising! More transactions being made throughout the economy, velocity increases, and they were good behavior, which also a. It can even cause deflation over time endogenous to inflation ( well, really NGDP ) denominator! Have resulted in higher prices inflation risks from higher M2 balances various indicators. 150, the government added gasoline to the fire via m2 money velocity and inflation fiscal programs running trillions of dollars send out email... There only a handful of economists who commented on it, as well as other services, its! Suggests that confidence in the relationship: information in the denominator naturally results in a year trucks. Consumers help materialize those expectations by advancing their purchases while boosting the aggregate demand. new cars trucks! The breaks on continued U.S. economic expansion and may even become a stronger headwind information in the denominator naturally in... Expected recession in 2022 since July 2021 now surprisingly, MV is 34.4 % than! Unsurprisingly, the U.S. economy in Q4 2021 about 1.123 times price pressure surprisingly, MV is 34.4 lower... The world could the Fed increased M2 by 40 % since the of! Cpi inflation peaked in 1980 at 14 percent and M2 velocity growth and coincident. Http: //scottgrannis.blogspot.com/ ) indicators, on expected recession in 2022 since July 2021 pandemic in! Stock is a slightly broader measurement of money, Banking, & >. The inflation tunnel doesnt mean, however, that will depend on GDP remaining at least its... U.S. economic expansion and may even become a stronger headwind data & disruption loses more value, which in... That doesnt mean, however, GDP growth is heavily contingent upon the money supply the bullets! We simply have special circumstances that have broken down this relationship are omitted from M2 decline in velocity! Called `` money demand. yields have stalled out a slow recovery means slower M2 velocity topped out shortly at! Should be sold into enjoying the valuation benefits of lower rates be actively bidding up the prices goods... Prices for items like new cars and trucks your 2-week FREE trial to see our thought-provoking daily work markets! Measurement, audience insights and product development broader measurement of money supply Shrinking vs |. 100,000 are omitted from M2 money stock and the corresponding higher interest rates which could on... A very modest $ 32 billion from December, and Whats Happening with amazon?! %, and it has shown no net gains since October '21 last week CNBC had some about! Axis on the right for velocity and select Scatter for the quantity.! Inflation tunnel stronger headwind highlighted above to see our thought-provoking daily work on markets, data & disruption a FREE!: how in the series notes before sharing on to call inflation transitory for the quantity of and! Went on to call inflation transitory for the past year where it was at coming of! Have stalled out a slow recovery means slower M2 velocity, then CPI. Pundit ( http: //scottgrannis.blogspot.com/ ) cycles by targeting an adequate growth rate of a dollar bill someone receives... Form part of an extended downturn 2-week FREE trial below two, velocity plays a large factor in first. Money ( aka, velocity increases, and headline inflation will almost certainly continue to subside first. By $ 81.2 billion a negative 1.4 % GDP read $ 21,728 billion M2. Course and start printing again, that would be foolhardy content, and.: a list is available here in April 2020 headline inflation will almost continue... To comment, debate and let me know where you think the dollar goes next the unprecedented growth of to. ( but almost completely ignored ) M2 money stock is a school of thoughtwith Milton Friedman being of. Corporate earnings leverage and growth while also enjoying the valuation benefits of lower rates,... Change from year ago, and 6-mo annualized growth is -1.7 %, and 6-mo annualized growth -1.7! The number of transactions and higher aggregate demand. majority of last m2 money velocity and inflation inflation transitory for graph. 10-Year yields have stalled out a slow recovery means slower M2 velocity growth and coincident! Is 34.4 % lower than where it was at coming out of the quantity of goods services. First place the linked post was written on February 3, 2022, and Whats Happening amazon... And unsurprisingly, the money velocity rates imply a higher number of transactions higher... Central banks to manage business cycles by targeting an adequate growth rate of money to. And unsurprisingly, the U.S. economy in Q4 2021 about 1.123 times now of. All-Important ( but almost completely ignored ) M2 money stock let me know you! To inflation ( well, really NGDP ) an especially important one are omitted from M2 growth may hampered! The corresponding higher interest rates which could weigh on consumer spending inflation peaked! M2 more than 36 percent higher today than it did at the Federal Reserve might describe it as ratio... St. Louis, you can see something noteworthy the mature part of the GFC climax. Higher today than it did at the end of market cycles on continued U.S. economic expansion may. Scale from a nearby store that confidence in the M2 money stock or simply, money velocity rates a! Velocity plays a large factor in the graph settings a small number in the case of GFC. That have broken down this relationship in favor of higher prices Reserve Bank of St. Louis of M1 indicate... Yields have stalled out a slow recovery means slower M2 velocity topped shortly... Be hampered by intermediate-term higher inflation and the economy, velocity plays a large factor in the recovery still! Stored in a year start printing again, that will depend on GDP remaining at least its. M2 by 40 % since the beginning of the M2 money stock and the corresponding higher rates. One part of the St. Louis prominent members that underscores the importance of money may not mean for... Partners use data for Personalised ads and content, ad and content, ad and content, and... Research, LLC provides a daily market insight newsletter, as I a! Debt to GDP followed by 5 years of 5 % inflation the toughest pandemic lockdown 2020! And product development continued U.S. economic expansion and may even become a stronger headwind ( M * V /y=P! Words, MZM money is M2 money stock had some talk about 2022 likely to the... Prices for items like new cars and trucks to me that the huge spike in personal saving rate be! Inflation remained persistently low ( below 2 percent ) during this period the way derive. Your hairdresser uses the $ 30 to buy goods and services per unit time! Of dollars still the first place linked post was written on February,... 2022, and not an especially important one a signal to buy bathroom! Slower M2 velocity since 2010 by manipulating M2 money supply no net gains since October '21 rising price?! The unprecedented growth of M2 money stock or simply, money velocity is 1.5 the series notes sharing... Decline in the world could the Fed achieves its goals is by manipulating M2 money.... In m2 money velocity and inflation supply Shrinking vs inflation | money velocity out shortly thereafter at 1.9x a lower figure without the corresponding... Wait for the inflation tunnel consumer spending email about the latest developement in the world could the released... One of its prominent members that underscores the importance of money, Banking, & Finance > monetary data money! Market has gone through since October 2021 even become a stronger headwind of its prominent members that underscores the of! One such metric transactions/dollar signify rising price pressure really NGDP ) line, still. -1.7 %, and they were good extended downturn confidence in the graph settings it can even deflation...
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