Taps Coogan – September 26th, 2020
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M2 money is now growing at 25% year-over-year, continuing to rise despite a slowdown in the pace of quantitative easing and fiscal stimulus over the summer. We are now witnessing the fastest rate of growth in the money supply on record by more than double.
Whereas past quantitative easing programs had little-to-no detectable impact on money supply growth (the liquidity got trapped at the Fed and banks), the Covid response is a completely different animal. Congressional spending, stimulus checks, expanded unemployment, and the direct monetization of corporate bonds have led to over three trillion new dollars making it into the money supply.
As Milton Friedman famously noted, monetary policy works with long and variable lags. Time will tell what the Fed has done.
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