The Money Boom Is Already Here

Date: 22‑02‑2021

Source: The Wall Street Journal By John Greenwood and Steve H. Hanke

Since February 2020, the M2 supply has increased 26%—the largest one‑year jump since 1943.

Speculative manias are in the air, as evidenced by the recent price surges for bitcoin, a digital asset with a fundamental value of zero, and GameStop, a declining retailer. Along with the other economic trends—a strong recovery, surging commodity prices and an uptick in inflation—those asset bubbles have a clear cause: the massive expansion of money and credit.

Yet America’s fiscal and monetary masters are turning a blind eye. They are focused solely on mending the labor market. With the fervor of messiahs, Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen tell us the only way to save the labor market and reach full employment is to continue to pour fiscal and monetary fuel on the fire. But their prescriptions and prophecies, modeled on the playbook of the 2008 financial crisis, are not valid today.

An abundance of money enhances economic efficiency and financial stability

Date: 12-04-2017
Source: The Economist
Subject: Why the Federal Reserve should keep its balance-sheet large

HOW much money should exist? The Federal Reserve must soon confront this deep question. The Fed has signalled that towards the end of 2017 it will probably begin to unwind quantitative easing (QE), the purchase of financial assets using newly created bank reserves. The central bank’s balance-sheet swelled from about $900bn on the eve of the financial crisis to about $4.5trn by 2015 as it bought mortgage-backed securities and government debt (see chart). If and when the Fed shrinks its balance-sheet, it will also retire the new money it created.

Economists such as Milton Friedman popularised the study of the quantity of money in the 1960s and 1970s. By the financial crisis, however, the subject had gone out of fashion. The interest rate, it was agreed, was what mattered for the economy. The Fed varied the supply of bank reserves, but only to keep rates in the market for interbank loans where it wanted them to be.

Japan’s “Helicopter Money” Play: Road to Hyperinflation or Cure for Debt Deflation?

Posted on July 25, 2016 by Ellen Brown, Web of Debt Blog

Fifteen years after embarking on its largely ineffective quantitative easing program, Japan appears poised to try the form recommended by Ben Bernanke in his notorious “helicopter money” speech in 2002. The Japanese test case could finally resolve a longstanding dispute between monetarists and money reformers over the economic effects of government-issued money.

When then-Fed Governor Ben Bernanke gave his famous helicopter money speech to the Japanese in 2002, he was talking about something quite different from the quantitative easing they actually got and other central banks later mimicked. Quoting Milton Friedman, he said the government could reverse a deflation simply by printing money and dropping it from helicopters. A gift of free money with no strings attached, it would find its way into the real economy and trigger the demand needed to power productivity and employment.

What the world got instead was a form of QE in which new money is swapped for assets in the reserve accounts of banks, leaving liquidity trapped on bank balance sheets. Whether manipulating bank reserves can affect the circulating money supply at all is controversial. But if it can, it is only by triggering new borrowing. And today, according to Richard Koo, chief economist at the Nomura Research Institute, individuals and businesses are paying down debt rather than taking out new loans. They are doing this although credit is very “accommodative” (cheap), because they need to rectify their debt-ridden balance sheets in order to stay afloat. Koo calls it a “balance sheet recession.”

What Quantitative Easing Did Not Do: Three Revealing Charts

Author: Ed Dolan  ·  November 4th, 2014  ·  RGE EconoMonitor

The Fed has declared an official end to quantitative easing. It is a logical time to ask, did QE work? Danielle Kurtzleben gives the honest answer in a recent post on Vox: “It’s very, very hard to know.”

Still, we do know three things that QE did not do. These are worth pointing out, especially since back when QE was just getting under way, there were people who expected that QE 2 would do all of them.

1. QE did not work according to the textbook model

One thing was never in doubt.  As the Fed added massively to its assets, QE would cause an equally massive increase in the monetary base—the sum of bank reserves and currency that accounts for the bulk of its liabilities.

Some economists used to refer to the base as high powered money. It got that name from a familiar textbook model, according to which two simple ratios link the monetary base to the rest of the economy. One is the money multiplier, which is the ratio of ordinary money (M2) to the monetary base. The other is the ratio of nominal GDP to the M2 money stock, known as the velocity of circulation of money, or just velocity, for short.

If the money multiplier and velocity were constants, then the monetary base would be high-powered indeed. Any increase in the base (which the Fed can manipulate at will) would cause a proportional increase in nominal GDP. The only thing left to determine would be how much of the change in nominal GDP would express itself as an increase in real output and how much as inflation.

Do Banks Create Money from Thin Air?

Author: Dan Kervick · June 4th, 2013 · RGE EconoMonitor 

It is sometimes said that commercial banks in our modern monetary system create money “from thin air”. While there is truth in this metaphorical claim, the metaphor can also be seriously misleading, and leads some to attribute powers to commercial banks that are actually retained by the government alone under our system. It is worth trying to get clear about all this.

Suppose you have some debt to pay; or suppose that there is some good or service that you wish to purchase on the spot. How can you make the payment? Clearly you are going to have to hand over something of positive value. In order to pay off a debt you will have to possess some asset that you can transfer to your creditor in a way that discharges your obligation. Similarly, in order to purchase some good or service on the spot, you will need to possess some asset that the seller is willing to accept in exchange for the good or service that is sold to you. The asset you use might be a very specific, unique and particularized kind of thing, depending on the nature of whatever implicit or explicit contract you have with the creditor or seller. But more often than not, you will pay with a generic and widely accepted type of asset, once which in used routinely to buy things and discharge debts, and that seems to exist mainly or solely for those very purposes. Such payment assets have existed in many different forms historically, along with different kinds systems for generating, storing, transferring and regulating these assets. We customarily call these assets “money”.

6 Charts Which Prove That Central Banks All Over The Globe Are Recklessly Printing Money

The Economic Collapse,

 und das soll gut gehen? Die Propagandamaschinerie läuft auf Hochtouren – wir stehen vor einem neuen „goldenen Zeitalter“ mit einer Verdreifachung des weltweiten BSP bis zum Jahre 2030! Na dann los (GR)

If the U.S. dollar is being devalued so rapidly, then why does it sometimes increase in value against other global currencies?  Well, it is because everybody is recklessly printing money now.  The 6 charts which you are about to see below prove this.  The truth is that it is not just the U.S. Federal Reserve which has been printing money like there is no tomorrow.  Out of control money printing has also been happening in the UK, in the EU, in Japan, in China and in India.  There are times when one particular global currency will fall faster than the others, but the reality is that they are all being rapidly devalued.  Unfortunately, this is a recipe for a global economic nightmare.

Right now you can almost smell the panic as it rises in global financial markets.  Investors all over the world are racing to get out of paper and to get into hard assets.  Just about anything that is „real“ and „tangible“ is hot right now.  Gold hit a record high last year and it is on the rise again.  In fact, it just hit a new five-week high.  Demand for silver is becoming absolutely ridiculous right now.  Oil is marching up towards $100 a barrel again.  Agricultural commodities have exploded in price over the past year.  Many investors are even gobbling up art and other collectibles.

Paper money is no longer considered to be safe.  All over the globe investors are watching all of the reckless money printing that has been going on and they are becoming alarmed.  An increasing number of investors and financial institutions are putting their wealth into hard assets that are real and tangible in an effort to preserve their wealth.

The Correlation Between Money Base Growth and Inflation

Menzie Chinn, RGE Monitor, Dec 9, 2010 2:07PM

I’ve been reading through undergraduate textbooks, trying to figure out where the idea that money base expansion must necessarily manifest itself in higher inflation. In Stephen Williamson’s macro textbook, he argues that fears of inflation are motivated by the view that eventually, money base expansion will feed into money expansion (box on pp. 432), despite the fact that there is no obvious contemporaneous correlation between the two variables. 

Eurozone Money Supply Growth: Money Multiplier Shrinking

• Money and credit growth in the eurozone has been slowing. Broad money supply growth has slowed faster than narrow money though, suggesting that lending institutions are still unable or reluctant to provide credit. Loans to the private sector slowed from 1.5% y/y in June 2009 to 0.6% y/y July, the lowest level since 1992. Loans to non-financial corporations dropped to 1.6% y/y in July from 2.8% y/y in June. Loans to households turned around its 0.2% y/y growth in June to 0.0% y/y in July.