3 ms·

How should I interpret this? There’s a huge jump in may 2020, but apparently the metric was redefined in may 2020 to include more stuff? from the Q&A page link

by rrss 5y ago

How should I interpret this? There’s a huge jump in may 2020, but apparently the metric was redefined in may 2020 to include more stuff? from the Q&A page linked at the bottom: > Recognizing savings deposits as a transaction account as of May 2020 will cause a series break in the M1 monetary aggregate. Beginning with the May 2020 observation, M1 will increase by the size of the industry total of savings deposits, which amounted to approximately $11.2 trillion

lifeisstillgood 5y ago
I think you have hit the nail on the head. Look at the M2 measure - https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL - it's a (scary / steady) growth from the 80s to now with a jump in covid. It does not show the vast leap M1 does - and mostly because the M1 metric itself has changed - not the underlying amount of money in the world. I mean that M1 jump in "real" numbers would mean a creation of 16 Trillion dollars - insane
- okl 5y ago
  I think you should compare the money supply with economic growth. (Money velocity: https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V) There's a relation between the two: > Economic growth tends to have a natural deflationary effect, even if the supply of money does not shrink. Some evidence of this phenomenon can be observed in the technology sector, where innovations and technological advancements are growing faster than inflation; currently, the prices of televisions, cellphones, and computers tend to be falling. [https://www.investopedia.com/ask/answers/070615/what-correlation-between-money-supply-and-gdp.asp https://www.investopedia.com/ask/answers/070615/what-correla...]
  - throwawaygh 5y ago
    no No NO! Your parent posts are right. The definition of M1 changed. The "omg so much printing in the last year" folks are literally taking two different definitions that are $16 TRILLION dollars apart due to the change in Reg D and conflating them.

by rrss 5y ago

lifeisstillgood 5y ago

I think you have hit the nail on the head. Look at the M2 measure - https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL - it's a (scary / steady) growth from the 80s to now with a jump in covid. It does not show the vast leap M1 does - and mostly because the M1 metric itself has changed - not the underlying amount of money in the world. I mean that M1 jump in "real" numbers would mean a creation of 16 Trillion dollars - insane

okl 5y ago
I think you should compare the money supply with economic growth. (Money velocity: https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V) There's a relation between the two: > Economic growth tends to have a natural deflationary effect, even if the supply of money does not shrink. Some evidence of this phenomenon can be observed in the technology sector, where innovations and technological advancements are growing faster than inflation; currently, the prices of televisions, cellphones, and computers tend to be falling. [https://www.investopedia.com/ask/answers/070615/what-correlation-between-money-supply-and-gdp.asp https://www.investopedia.com/ask/answers/070615/what-correla...]
- throwawaygh 5y ago
  no No NO! Your parent posts are right. The definition of M1 changed. The "omg so much printing in the last year" folks are literally taking two different definitions that are $16 TRILLION dollars apart due to the change in Reg D and conflating them.