4 ms·

To couch this for the US assets, 2020 M2 money supply shot up 30%, a historically significant amount. I'm still waiting to see if the "gains" in stocks/housing

To couch this for the US assets, 2020 M2 money supply shot up 30%, a historically significant amount. I'm still waiting to see if the "gains" in stocks/housing since 2020 is really a gain or the immediate result of price inflation due to money printing. Or "quantitative easing".

sokoloff 5y ago
The M2 inclusions changed in May 2020: https://gonzoecon.com/2021/04/m1-and-m2-have-changed/ https://gonzoecon.com/2021/04/m1-and-m2-have-changed/
- nostrademons 5y ago
  From your article, M1 inclusions changed in May 2020, to include Savings & other Checkable deposits which were previously in M2. M1 is now effectively the same as M2 and is no longer reported independently. To my knowledge, there have been no significant changes to the definition of M2 in 2020. The increase there is real. The M2 definition change mentioned in the article was on Jan 1, 1973.
  - sokoloff 5y ago
    Ok. Thanks for correction. Teaches me to not to discuss complex topics online while trick-or-treating. I’ll read it more carefully next time/later.
- repsilat 5y ago
  To be honest, those definitions are looking pretty arbitrary. I read the other day[1] (from an academic economist, though perhaps not a mainstream one?), >> The government, Fed and Treasury, basically printed up about $5 trillion of new cash and treasury debt -- these are largely perfect substitutes so the composition doesn't really matter. I take this to mean, "interest rates are around zero, and the debt is going to be rolled over when it comes due." An I guess Treasury mostly issues short-term debt, and the Fed is holding short-term rates down, so if we assume new debt issuance has ~no interest-rate impact, fiscal effects seem to have more relevance to inflation than monetary ones: - Monetary interventions mostly trade "money-like" things for other "money-like" things, both sides denominated in dollars. Maybe the actual dollars involved are "created", but the bonds bought are effectively retired, so no real net effect. - Fiscal interventions involve creation of "money like" things and trading them for goods and services, bidding up prices. Interest rate markets look like they're expecting some give in the short term, so maybe this will stop being quite as true, but it looks like those markets aren't predicting anything like "normalisation" over the longer term. 1: https://johnhcochrane.blogspot.com/2021/10/transitory-inflation-fisherian-fed.html https://johnhcochrane.blogspot.com/2021/10/transitory-inflat...
jjeaff 5y ago
As the other commenter mentioned M2 supply is up, but a lot of that is actually due to a change in how it is calculated. But m2 supply is up. That being said, low interest rates probably has a lot more to do with prices going up.

sokoloff 5y ago

The M2 inclusions changed in May 2020: https://gonzoecon.com/2021/04/m1-and-m2-have-changed/ https://gonzoecon.com/2021/04/m1-and-m2-have-changed/

nostrademons 5y ago
From your article, M1 inclusions changed in May 2020, to include Savings & other Checkable deposits which were previously in M2. M1 is now effectively the same as M2 and is no longer reported independently. To my knowledge, there have been no significant changes to the definition of M2 in 2020. The increase there is real. The M2 definition change mentioned in the article was on Jan 1, 1973.
- sokoloff 5y ago
  Ok. Thanks for correction. Teaches me to not to discuss complex topics online while trick-or-treating. I’ll read it more carefully next time/later.
repsilat 5y ago
To be honest, those definitions are looking pretty arbitrary. I read the other day[1] (from an academic economist, though perhaps not a mainstream one?), >> The government, Fed and Treasury, basically printed up about $5 trillion of new cash and treasury debt -- these are largely perfect substitutes so the composition doesn't really matter. I take this to mean, "interest rates are around zero, and the debt is going to be rolled over when it comes due." An I guess Treasury mostly issues short-term debt, and the Fed is holding short-term rates down, so if we assume new debt issuance has ~no interest-rate impact, fiscal effects seem to have more relevance to inflation than monetary ones: - Monetary interventions mostly trade "money-like" things for other "money-like" things, both sides denominated in dollars. Maybe the actual dollars involved are "created", but the bonds bought are effectively retired, so no real net effect. - Fiscal interventions involve creation of "money like" things and trading them for goods and services, bidding up prices. Interest rate markets look like they're expecting some give in the short term, so maybe this will stop being quite as true, but it looks like those markets aren't predicting anything like "normalisation" over the longer term. 1: https://johnhcochrane.blogspot.com/2021/10/transitory-inflation-fisherian-fed.html https://johnhcochrane.blogspot.com/2021/10/transitory-inflat...

jjeaff 5y ago

As the other commenter mentioned M2 supply is up, but a lot of that is actually due to a change in how it is calculated. But m2 supply is up. That being said, low interest rates probably has a lot more to do with prices going up.