Comment:
Before May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other checkable deposits (OCDs), consisting of negotiable order of withdrawal, or NOW, and automatic transfer service, or ATS, accounts at depository institutions, share draft accounts at credit unions, and demand deposits at thrift institutions.
Beginning May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other liquid deposits, consisting of OCDs and savings deposits (including money market deposit accounts). Seasonally adjusted M1 is constructed by summing currency, demand deposits, and OCDs (before May 2020) or other liquid deposits (beginning May 2020), each seasonally adjusted separately.
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.
I don’t have any classical Greek, but I assume this is bad.
Whether it’s bad or not is a matter of debate. It’s certainly dramatic.
We’re talking money supply. Simply stated the U. S. money supply has increased enormously over the last year or so.
More disturbing is the increase in M0 (Monetary Base) after 2008. Check any of the charts at the link. In the Modern Monetary System (MMS), M1, M2, M3 are derivatives leveraged from M0.
(Historically, base money would be gold, silver, copper, etc. coins, and increasing the monetary base would require mining ore to be minted. In the MMS, M0 is similar to base money, but nonetheless, it is not actual base money.)
With the initial QE programs, collateralized assets were being transmuted into base money, but at this point, the Fed may be transforming stocks into money. The coming economic collapse is going to make 1920-1933 look like a day at the beach.
Most of the effect of QE has been to increase wealth inequality. What the recent stepping up in activity will do is anybody’s guess. We’re entering unexplored territory.