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Broad M2 growth has surged to the highest level in several decades.
Before rushing to inflation, we should consider a few things.
First, broad M2 growth can spike in the middle of recessions.
Before rushing to inflation, we should consider a few things.
First, broad M2 growth can spike in the middle of recessions.
Also, a big factor driving the increase in broad money growth is retail money funds which are up 24% Y/Y.
Austrians have a more refined version of money supply growth which excludes several categories in broad M2 growth including MMF and time deposits.
When excluding these categories, "True Money Growth" or TMS-2 is increasing far less.
When excluding these categories, "True Money Growth" or TMS-2 is increasing far less.
If we use the 2-year rate of growth emphasized by Friedman and Dr. Lacy Hunt, the rate of growth is even less and consistent with past recessionary periods.
Institutional money funds are up 33% Y/Y
Why do Austrians exclude these categories?
"because they do not represent a final medium of exchange (in the case of traveler's checks or MMMFs, they are ultimately redeemed for cash or checking deposits)"
"because they do not represent a final medium of exchange (in the case of traveler's checks or MMMFs, they are ultimately redeemed for cash or checking deposits)"
