3 ms·

This chart of M2 looks like the amount of money pumped into the economy was anything but a fixed amount. Unless, if you're talking about the first derivate of

This chart of M2 looks like the amount of money pumped into the economy was anything but a fixed amount. Unless, if you're talking about the first derivate of M2, then you could argue number is fixed. https://fred.stlouisfed.org/series/WM2NS https://fred.stlouisfed.org/series/WM2NS

legitster 4y ago
Sure. The government injected a bunch of money, but then banks took advantage of low interest rates and created money at a faster clip than the fed anticipated. The question is why they kept rates so low for so long, and the answer provided here is they didn't plan for a trade retraction.
michael1999 4y ago
That's a great link. If you edit the graph and replace it with "Percent Change from Year Ago", you see the 2008 spike and recovery clearly, and the truly enormous spike starting at 2020. I'm surprised to see ~5% growth since Volker. That is higher than I'd expect. But if you add Real GDP to that chart, you can see the 2020 contraction was much larger than 2008, so the intervention was at least arguable. https://fred.stlouisfed.org/series/WM2NS#0 https://fred.stlouisfed.org/series/WM2NS#0
- pacerwpg 4y ago
  > Before May 2020, M2 consists of M1 plus (1) savings deposits (including money market deposit accounts); (2) small-denomination time deposits (time deposits in amounts of less than $100,000) less individual retirement account (IRA) and Keogh balances at depository institutions; and (3) balances in retail money market funds (MMFs) less IRA and Keogh balances at MMFs. > 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. Seasonally adjusted M2 is constructed by summing savings deposits (before May 2020), small-denomination time deposits, and retail MMFs, each seasonally adjusted separately, and adding this result to seasonally adjusted M1. > For more information on the H.6 release changes and the regulatory amendment that led to the creation of the other liquid deposits component and its inclusion in the M1 monetary aggregate, see the H.6 announcements and Technical Q&As posted on December 17, 2020. Source for the additional information is the link in your post.
  - michael1999 4y ago
    Oh. So the discontinuity is an artifact of the change in the series. Once the discontinuity ages out (June 2021), M2 is still running 13% over a year prior. That's historically high, but not so much higher than the 10% back in 2003, 2008, and 2012. Thank you. That makes much more sense.
    - pacerwpg 4y ago
      It's a shame there isn't a normalized chart available. It makes a concerning situation very hard to read.
      - michael1999 4y ago
        It is hard to resist suspicion of the timing.

legitster 4y ago

Sure. The government injected a bunch of money, but then banks took advantage of low interest rates and created money at a faster clip than the fed anticipated. The question is why they kept rates so low for so long, and the answer provided here is they didn't plan for a trade retraction.

michael1999 4y ago

That's a great link. If you edit the graph and replace it with "Percent Change from Year Ago", you see the 2008 spike and recovery clearly, and the truly enormous spike starting at 2020. I'm surprised to see ~5% growth since Volker. That is higher than I'd expect. But if you add Real GDP to that chart, you can see the 2020 contraction was much larger than 2008, so the intervention was at least arguable. https://fred.stlouisfed.org/series/WM2NS#0 https://fred.stlouisfed.org/series/WM2NS#0

pacerwpg 4y ago
> Before May 2020, M2 consists of M1 plus (1) savings deposits (including money market deposit accounts); (2) small-denomination time deposits (time deposits in amounts of less than $100,000) less individual retirement account (IRA) and Keogh balances at depository institutions; and (3) balances in retail money market funds (MMFs) less IRA and Keogh balances at MMFs. > 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. Seasonally adjusted M2 is constructed by summing savings deposits (before May 2020), small-denomination time deposits, and retail MMFs, each seasonally adjusted separately, and adding this result to seasonally adjusted M1. > For more information on the H.6 release changes and the regulatory amendment that led to the creation of the other liquid deposits component and its inclusion in the M1 monetary aggregate, see the H.6 announcements and Technical Q&As posted on December 17, 2020. Source for the additional information is the link in your post.
- michael1999 4y ago
  Oh. So the discontinuity is an artifact of the change in the series. Once the discontinuity ages out (June 2021), M2 is still running 13% over a year prior. That's historically high, but not so much higher than the 10% back in 2003, 2008, and 2012. Thank you. That makes much more sense.
  - pacerwpg 4y ago
    It's a shame there isn't a normalized chart available. It makes a concerning situation very hard to read.
    - michael1999 4y ago
      It is hard to resist suspicion of the timing.