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> We printed 40% of all dollars ever printed last year. (!!!) Stop repeating this bullshit. It's is a reporting artifact that doesn't mean what you think it

> We printed 40% of all dollars ever printed last year. (!!!) Stop repeating this bullshit. It's is a reporting artifact that doesn't mean what you think it means. $11.2T that wasn't previously reported in M1 was added to the definition in May 2020 due to regulatory changes prior to 2020. That money didn't poof out of thin air; it already existed prior to May 2020. The step change that happened in May 2020 has absolutely nothing to do with anything real... that massive discontinuity (which happened before the major stimulus spending, btw) is almost entirely attributable the definition of M1 changing. See https://news.ycombinator.com/item?id=28818494 https://news.ycombinator.com/item?id=28818494 for more discussion.

adam_arthur 5y ago
Why mention stimulus when fiscal policy has nothing to do with money supply? The money supply changes when the Fed decides to print money to acquire assets, which has nothing to do with congressional legislation.
- throwawaygh 5y ago
  > Why mention stimulus when fiscal policy has nothing to do with money supply? Why, indeed. (More explicitly: I'm pretty clearly critiquing to an implicit conflation of the two, not positing one.) > The money supply changes when the Fed decides to print money to acquire assets, which has nothing to do with congressional legislation. Just to be pedantic since this whole thing 40% defies any presumption of reasonable numeracy... this is entirely irrelevant to the bat-shit insanity 40% claim. If the Fed changed the statutory definition of M1 to now include $11 trillion that definition 100% existed previously but wasn't part of the formal statutory definition of M1. So M1 "increased" in one immediate massive instantaneous step change by exactly $11 trillion. Shocker! Again, not because anything real changed in the actual money supply. But because a bunch of money that definitely did already exist previously but wasn't part of a definition denoted by "M1" was added to the definition of "M1".
  - adam_arthur 5y ago
    M2 is the more commonly referenced money supply figure. Have you looked at the M2 money supply lately? https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL Very obviously massive amount of money printing. Order of magnitude more than was ever done during the GFC. Roughly 30% of the money supply printed in the span of 18 months. And they keep going, every day printing billions. This was meant to be an emergency procedure to save the economy, and it made sense at the very initial stages. Now it just acts as a hyper accelerant towards wealth inequality. Yet we have many cheering it on, talking about nominal wage gains, as people become poorer in real terms. Or because their stock portfolio/house is appreciating. Unfortunately the Fed has fallen to both populism and political pressure. It's been obvious for months that the best risk adjusted policy was to begin tightening long ago. I say risk adjusted, because if they're wrong about transitory inflation, they will have to hike suddenly and induce a recession. So we risk a recession and we gained what? The economy is overheating right now, as is very obvious by retail sales being elevated 20% above baseline (resulting in shortages) and the widest gap between job openings and job seekers in history. The Fed is meant to smooth peaks and troughs in the business cycle, not pour gasoline on them.
- imtringued 5y ago
  Why care about money supply if it is just sitting on a banks' balance sheet without ever entering the real economy?
  - adam_arthur 5y ago
    Because the Fed is suppressing bond yields with their asset purchases. This artificially distorts many things in the market, generally towards a risk on fashion. It's a big reason that housing is having an epic, historic rally, through suppressed 10y yields which tend to lead to lower mortgage rates. If you look at the summary of Fed purchases, published monthly, they are buying bonds across all maturities, not just short term bonds as they've done in the past. It makes closing the bottle again more difficult. The Fed is effectively monetizing the US Government deficit by buying ~60% of all new treasuries issued (bank buys bonds and sells to the Fed). And a lot of it relates to psychology of the markets. They continue to pour gasoline and encourage risk taking at exactly the wrong time. It's likely this money will eventually make its way into circulation... it depends on consumer credit patterns. But the money won't leave the supply until the purchased bonds fully mature, which can be up to 30 years. So yes, QE needs to end, regardless of whether the money ends up locked away in a bank's balance sheet. I believe the Federal Reserve should enact the best risk adjusted policy, not the best policy for the immediate term, which is their new mantra. The medium-long term risks to their current policy far outweigh the benefit at this point. Easy money policies always look more appealing from a short term perspective... always. That's why when populism takes over the monetary system, you see these policies proliferate, often with disastrous consequences. Look at the currencies of many South American countries for evidence of this.
lend000 5y ago
Meanwhile, M2 has increased nearly 30% since April 2020 (perhaps this is what OP meant to say) with no definition changes. Were you unaware of this, and thinking people were misunderstanding the M1 definition change for the last year?
- deleted 5y ago
  [deleted]
ArtTimeInvestor 5y ago
I think the notion that we printed 40% of all money in existance last year holds. The FED balance sheet is also up by about 40% last year: https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren... And AFAIK the FED prints the money they buy their assets with.

adam_arthur 5y ago

Why mention stimulus when fiscal policy has nothing to do with money supply? The money supply changes when the Fed decides to print money to acquire assets, which has nothing to do with congressional legislation.

throwawaygh 5y ago
> Why mention stimulus when fiscal policy has nothing to do with money supply? Why, indeed. (More explicitly: I'm pretty clearly critiquing to an implicit conflation of the two, not positing one.) > The money supply changes when the Fed decides to print money to acquire assets, which has nothing to do with congressional legislation. Just to be pedantic since this whole thing 40% defies any presumption of reasonable numeracy... this is entirely irrelevant to the bat-shit insanity 40% claim. If the Fed changed the statutory definition of M1 to now include $11 trillion that definition 100% existed previously but wasn't part of the formal statutory definition of M1. So M1 "increased" in one immediate massive instantaneous step change by exactly $11 trillion. Shocker! Again, not because anything real changed in the actual money supply. But because a bunch of money that definitely did already exist previously but wasn't part of a definition denoted by "M1" was added to the definition of "M1".
- adam_arthur 5y ago
  M2 is the more commonly referenced money supply figure. Have you looked at the M2 money supply lately? https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL Very obviously massive amount of money printing. Order of magnitude more than was ever done during the GFC. Roughly 30% of the money supply printed in the span of 18 months. And they keep going, every day printing billions. This was meant to be an emergency procedure to save the economy, and it made sense at the very initial stages. Now it just acts as a hyper accelerant towards wealth inequality. Yet we have many cheering it on, talking about nominal wage gains, as people become poorer in real terms. Or because their stock portfolio/house is appreciating. Unfortunately the Fed has fallen to both populism and political pressure. It's been obvious for months that the best risk adjusted policy was to begin tightening long ago. I say risk adjusted, because if they're wrong about transitory inflation, they will have to hike suddenly and induce a recession. So we risk a recession and we gained what? The economy is overheating right now, as is very obvious by retail sales being elevated 20% above baseline (resulting in shortages) and the widest gap between job openings and job seekers in history. The Fed is meant to smooth peaks and troughs in the business cycle, not pour gasoline on them.
imtringued 5y ago
Why care about money supply if it is just sitting on a banks' balance sheet without ever entering the real economy?
- adam_arthur 5y ago
  Because the Fed is suppressing bond yields with their asset purchases. This artificially distorts many things in the market, generally towards a risk on fashion. It's a big reason that housing is having an epic, historic rally, through suppressed 10y yields which tend to lead to lower mortgage rates. If you look at the summary of Fed purchases, published monthly, they are buying bonds across all maturities, not just short term bonds as they've done in the past. It makes closing the bottle again more difficult. The Fed is effectively monetizing the US Government deficit by buying ~60% of all new treasuries issued (bank buys bonds and sells to the Fed). And a lot of it relates to psychology of the markets. They continue to pour gasoline and encourage risk taking at exactly the wrong time. It's likely this money will eventually make its way into circulation... it depends on consumer credit patterns. But the money won't leave the supply until the purchased bonds fully mature, which can be up to 30 years. So yes, QE needs to end, regardless of whether the money ends up locked away in a bank's balance sheet. I believe the Federal Reserve should enact the best risk adjusted policy, not the best policy for the immediate term, which is their new mantra. The medium-long term risks to their current policy far outweigh the benefit at this point. Easy money policies always look more appealing from a short term perspective... always. That's why when populism takes over the monetary system, you see these policies proliferate, often with disastrous consequences. Look at the currencies of many South American countries for evidence of this.

lend000 5y ago

Meanwhile, M2 has increased nearly 30% since April 2020 (perhaps this is what OP meant to say) with no definition changes. Were you unaware of this, and thinking people were misunderstanding the M1 definition change for the last year?

deleted 5y ago
[deleted]

ArtTimeInvestor 5y ago

I think the notion that we printed 40% of all money in existance last year holds. The FED balance sheet is also up by about 40% last year: https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren... And AFAIK the FED prints the money they buy their assets with.