February Money-Supply Growth Hit Yet Another All-Time High

In February, money supply growth hit yet another all-time high. February's surge in money-supply growth makes February the eleventh month in a row of remarkably high growth, and came in the wake of unprecedented quantitative easing, central bank asset purchases, and various stimulus packages.

100 us dollar bill

During February 2021, year-over-year (YOY) growth in the money supply was at 39.1 percent. That's up slightly from January's rate of 38.7 percent, and up from the February 2020 rate of 7.3 percent. Historically this is a very large surge in growth, year over year. It is also quite a reversal from the trend that only just ended in August of 2019 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've seen since 2007.

Historically, the growth rate has never been higher than what we've seen over the past ten months, with the 1970s being the only period that comes close.

It is likely that growth will continue for the time being as it appears that now the United States is nearly a year into an extended economic crisis, with around 1 million new jobless claims each week from March until mid-September. Claims have remained above 600,000 every week since. Moreover, more than 3.8 million unemployed workers are currently collecting standard unemployment benefits, and total unemployment claims have failed to fall back to non-recessionary levels, even a year after lockdowns began. More than seven million additional unemployed are collecting "Pandemic Emergency Unemployment Compensation" as of February 27. 

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, 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.

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