In August, Money Supply Growth Hit A Record High For The Fifth Month In A Row

In August, for the fifth month in a row, money supply growth surged to an all-time high, following new all-time highs in April, May, June, and July that came in the wake of unprecedented quantitative easing, central bank asset purchases, and various stimulus packages.

The growth rate has never been higher, with the 1970s being the only period that comes close. It was expected that money supply growth would surge in recent months. This usually happens in the wake of the early months of a recession or financial crisis. But it appears that now the United States is several months into an extended economic crisis, with around 1 million new jobless claims each week from March until mid-September, with more than 12 million unemployed workers currently collecting benefits. Economic growth plummeted in the second quarter as GDP growth fell more than 9 percent. At a September press conference, Federal Reserve chairman Jerome Powell predicted "millions of people…are going to struggle to find work [for] couple of years at least.”

The central bank continues to engage in a wide variety of unprecedented efforts to "stimulate" the economy and provide income to unemployed workers and to provide liquidity to financial institutions. Moreover, as government revenues have fallen considerably, Congress has turned to unprecedented amounts of borrowing. But in order to keep interest rates low, the Fed has been buying up trillions of dollars in assets—including government debt. This has fueled new money creation.

During August 2020, year-over-year (YOY) growth in the money supply was at 37.56 percent. That's up from July's rate of 36.92 percent, and up from August 2019's rate of 1.86 percent. Historically this is a very large surge in growth, both month over month and year over year. It is also quite a reversal from the trend that only just ended in August of last year, when growth rates were nearly bottoming out around 2 percent. In August 2019, the growth rate hit a 120-month low, falling to the lowest growth rates we'd seen since 2007.

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