Peter Smith
⬤ America's M2 money supply reached a new peak of 22.3 trillion dollars in October. That is 4.6 percent higher than one year earlier and it continues a long running rise. The figure counts every dollar that people can spend right away - paper cash, coins checking balances, ordinary savings accounts plus retail money market fund shares.
⬤ Over the last twenty five years M2 expanded at an average pace of 6.3 percent a year. Growth surged once the pandemic began. Emergency programs in 2020 flooded the economy with liquidity - since that year the average yearly increase has been about 8 percent. A chart of the series shows a sharp jump in 2020, a short pause then a renewed climb that reaches new peaks in 2024 and 2025.
⬤ The breach of the 22-trillion mark is significant because the size of the money supply affects inflation, interest rates and investors’ willingness to take risk. Extra cash in bank accounts as well as wallets can push prices higher and can change beliefs about the Federal Reserve's next move. While officials debate future policy, this record amount of liquidity gives a clear backdrop for judging both the current state of the economy or the likely direction of the months ahead.
Peter Smith
