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> The M1 money supply increases from $4 trillion in December 2019 to $20 trillion in June 2022. That’s what’s causing the inflation. M1 didn't include savings

> The M1 money supply increases from $4 trillion in December 2019 to $20 trillion in June 2022. That’s what’s causing the inflation. M1 didn't include savings accounts in December 2019 and it does now, that's the majority of M1 diff... That makes me think your conclusions are based off talking-head points instead of first principles, as when your conclusion hinges on M1 changes, you'd think you'd do a few minutes searching what is M1...

cko 2y ago
https://collabfund.com/blog/the-fed-isnt-printing-as-much-money-as-you-think/ https://collabfund.com/blog/the-fed-isnt-printing-as-much-mo... Yep it was an accounting change. Though the additional wave of stimmy checks plus continued buying of MBS during 2021 was definitely not good for inflation.
- rayiner 2y ago
  It wasn’t just an accounting change. The money supply still more than doubled over just two years.
rayiner 2y ago
Thank you, I wasn’t aware of that change. I’m trying to make sense of what’s going on, and it’s hard to do since everyone seems to be in the can for one political faction or the other, and money printing is something both parties did so people aren’t talking about it. According to that source the accounting change is responsible for $11.4 trillion of the change. That means M1 really only went up from $4 trillion to $8.6 trillion in two years from February 2020 to June 2022. So we printed more money in two years of pandemic than in the previous twelve years of quantitative easing. How’s that still not the obvious culprit?
- reducesuffering 2y ago
  It's probably some of the culprit. But we've had 20% CPI since 2020, so it doesn't wholly explain everything in a "double the money, double the inflation" way. And a higher money supply doesn't mean that quality of life is worse either, since I'm sure you wouldn't want to go back to the 1930 US economy with vastly less money supply. If we could 2x the money supply again and get 1.1x goods & services for it, we should. Ultimately, I'm still not saying that recent inflation / money supply was good, just that you can't simply conclude that "because money supply went up, it's worse for people now."
  - rayiner 2y ago
    Nobody is saying that money supply itself is what’s bad. The problem is that increasing it too quickly caused inflation that’s pissing people off.
hollerith 2y ago
OK, but the fact that the definition of M1 changed right around the time Biden took office makes me wonder what Biden policies the change might have been intended to obscure. (I know the Fed is not under the direct control of the White House, but the change might've been made by decision-makers at the Fed whose sympathy with Biden overrode their commitment to impartially reporting monetary information to the public.)
- reducesuffering 2y ago
  The sibling comment's linked article answers this. "If you put money in a checking account, regulators make banks set aside a cushion as reserves in case they get into trouble. But if you put money into a savings account, regulators tell banks they don’t have to reserve anything. The catch is that it’s only considered a savings account if the consumer is allowed to make no more than six withdrawals per month. It’s worked that way for years. But then Covid hit, and regulators realized that having trillions of dollars in savings accounts with limited withdrawals was a burden as 22 million people lost their jobs. So last April the Fed changed the rules and eliminated the six-withdrawal limit on savings accounts. It wrote: The interim final rule allows depository institutions immediately to suspend enforcement of the six transfer limit and to allow their customers to make an unlimited number of convenient transfers and withdrawals from their savings deposits at a time when financial events associated with the coronavirus pandemic have made such access more urgent. It was an obvious and nearly risk-free way to help people. Just let them have easier access to their savings. But it changed the relationship between M1 and M2. Savings accounts are measured in M2 and left out of M1. But once the six-withdrawal rule was removed, every savings account suddenly became, in the eyes of regulators and people who make these charts, a checking account. So M1 exploded higher. Not because the Fed printed a bunch of money, but because trillions of dollars in savings accounts were reclassified as checking accounts." https://collabfund.com/blog/the-fed-isnt-printing-as-much-money-as-you-think/ https://collabfund.com/blog/the-fed-isnt-printing-as-much-mo...
  - hollerith 2y ago
    Thanks. Here is the graph for M2: https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL

cko 2y ago

https://collabfund.com/blog/the-fed-isnt-printing-as-much-money-as-you-think/ https://collabfund.com/blog/the-fed-isnt-printing-as-much-mo... Yep it was an accounting change. Though the additional wave of stimmy checks plus continued buying of MBS during 2021 was definitely not good for inflation.

rayiner 2y ago
It wasn’t just an accounting change. The money supply still more than doubled over just two years.

rayiner 2y ago

Thank you, I wasn’t aware of that change. I’m trying to make sense of what’s going on, and it’s hard to do since everyone seems to be in the can for one political faction or the other, and money printing is something both parties did so people aren’t talking about it. According to that source the accounting change is responsible for $11.4 trillion of the change. That means M1 really only went up from $4 trillion to $8.6 trillion in two years from February 2020 to June 2022. So we printed more money in two years of pandemic than in the previous twelve years of quantitative easing. How’s that still not the obvious culprit?

reducesuffering 2y ago
It's probably some of the culprit. But we've had 20% CPI since 2020, so it doesn't wholly explain everything in a "double the money, double the inflation" way. And a higher money supply doesn't mean that quality of life is worse either, since I'm sure you wouldn't want to go back to the 1930 US economy with vastly less money supply. If we could 2x the money supply again and get 1.1x goods & services for it, we should. Ultimately, I'm still not saying that recent inflation / money supply was good, just that you can't simply conclude that "because money supply went up, it's worse for people now."
- rayiner 2y ago
  Nobody is saying that money supply itself is what’s bad. The problem is that increasing it too quickly caused inflation that’s pissing people off.

hollerith 2y ago

OK, but the fact that the definition of M1 changed right around the time Biden took office makes me wonder what Biden policies the change might have been intended to obscure. (I know the Fed is not under the direct control of the White House, but the change might've been made by decision-makers at the Fed whose sympathy with Biden overrode their commitment to impartially reporting monetary information to the public.)

reducesuffering 2y ago
The sibling comment's linked article answers this. "If you put money in a checking account, regulators make banks set aside a cushion as reserves in case they get into trouble. But if you put money into a savings account, regulators tell banks they don’t have to reserve anything. The catch is that it’s only considered a savings account if the consumer is allowed to make no more than six withdrawals per month. It’s worked that way for years. But then Covid hit, and regulators realized that having trillions of dollars in savings accounts with limited withdrawals was a burden as 22 million people lost their jobs. So last April the Fed changed the rules and eliminated the six-withdrawal limit on savings accounts. It wrote: The interim final rule allows depository institutions immediately to suspend enforcement of the six transfer limit and to allow their customers to make an unlimited number of convenient transfers and withdrawals from their savings deposits at a time when financial events associated with the coronavirus pandemic have made such access more urgent. It was an obvious and nearly risk-free way to help people. Just let them have easier access to their savings. But it changed the relationship between M1 and M2. Savings accounts are measured in M2 and left out of M1. But once the six-withdrawal rule was removed, every savings account suddenly became, in the eyes of regulators and people who make these charts, a checking account. So M1 exploded higher. Not because the Fed printed a bunch of money, but because trillions of dollars in savings accounts were reclassified as checking accounts." https://collabfund.com/blog/the-fed-isnt-printing-as-much-money-as-you-think/ https://collabfund.com/blog/the-fed-isnt-printing-as-much-mo...
- hollerith 2y ago
  Thanks. Here is the graph for M2: https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL