Money Supply Question for the Economists - Are stimulus funds going into bank accounts and staying there?

[Tiny]

This means you, Lusty Lad or Captain Midnight.

There's been huge growth in the money supply during the Covid Crisis. M1+M2 has moved up from 19.9 trillion dollars on 3/16/2020 to 25.8 trillion at 12/22/2020.

Over the last 8 months, M1 is up 60% and M2 is up 24%. Taking a comparable period in the 2008/2009 recession, the increases were 8% and 14% respectively. I understand part of the reason for the jump in M1 is that the Fed moved savings accounts from M2 to M1, but regardless both are up a lot.

I realize a lot of this increase was because of the Fed. But does this also mean a good chunk of the stimulus money we're going to have to pay back someday has been going into bank accounts, instead of into, well, stimulus?

And is this a worry when people and businesses start spending again and the velocity of money picks up? Are we potentially looking at inflation down the road?

[eccieuser9500]

I'm not an economist, but I did stay at a Holiday Inn.

Just heard someone say: "It's not charity, it's a grant."

[Unique_Carpenter]

9500,
That clip is a waste of time. Pundits take forever to get to the point.

Getting back to Tiny's questions:

Going into Bank Accounts? Yes.
But, then being spent immediately on rent, mortgage or Credit Card bills

BTW, if anyone got last May's payment direct deposited, this time around it may actually be in same account Monday, Jan 4th. I know of two folks that can see an available funds note on their on-line bank accts.

As for the M1/M2 numbers, yes those are a concern. Further back in time aggressive increases of that crap was a prelude to inflation.

The M1/M2 balancing act to support economic growth vs inflation is the entire reason the Fed manages the base interest rate. Looking at industrial production last fall, the economy had started to recover again, even with covid. Thus, the most recent M1/M2 numbers can easily start an inflation run, I think sooner than most think.

At the current interest rate, there's no where to go but up. Thus, I suggest anyone with a mortgage of more than 2.75 refi asap simply to protect themselves.

[gnadfly]

Excellent analysis UC. The money is being spent by most. There's no option for them. Inflation is going to be a big bug a boo. The Fed is controlling it but eventually the market will take over.

When that happens and the foreclosure/eviction crisis happens Biden won't be able to handle the shitstorm.

[eccieuser9500]

Originally Posted by Unique_Carpenter

9500,
That clip is a waste of time. Pundits take forever to get to the point.

I'm sorry I wasted your time. Sincerely. That's the risk you take. Thanks for watching. Click subscribe, hit the like button and post a comment.

[Ripmany]

If goes in bank account it will become a personal cushion, the bank then can loan out the money the bank pay litter interest for use of it. Yes putting money into money with federal reserve brought bonds is same as printing money. In inflation is here just it not on everything, look at price of jerky, lumber, rice, tobacco, bottled oil, lawyers, entery drinks, gold, silver, many items such as gasoline have gone down but come right back to where were. When a government spends it taxes inflation is the replacement tax on the income tax cuts Trump did.

[Chung Tran]

Ripmany has the best answer so far. Don't let him fool you with his occasional WTF? threads, LOL..

I think this current stimulus will be largely spent, and soon. The last one was not, but that was larger, and before the downturn had kicked in for many. and inflation is here already, you know it and feel it. Bitcoin is at 34,000 for a reason.

[Tiny]

Originally Posted by Unique_Carpenter

Getting back to Tiny's questions:

Going into Bank Accounts? Yes.
But, then being spent immediately on rent, mortgage or Credit Card bills

Originally Posted by gnadfly

Excellent analysis UC. The money is being spent by most.

You may be closer to the truth than I am. Admittedly, the lion's share of the increase in the money supply wouldn't have come from stimulus funds. Or that's what I think anyway.

Still, I believe a good part of the stimulus spending wasn't needed. WTF linked to something on that -- see below. You'd expect Larry Summers, economist under Clinton and Obama, to think we need more stimulus, but that's not the case:

Originally Posted by WTF

https://www.businessinsider.com/2000...rom%20%251%24s

Mitch gotta be loving this...

[Tiny]

Originally Posted by Ripmany

If goes in bank account it will become a personal cushion, the bank then can loan out the money the bank pay litter interest for use of it. Yes putting money into money with federal reserve brought bonds is same as printing money. In inflation is here just it not on everything, look at price of jerky, lumber, rice, tobacco, bottled oil, lawyers, entery drinks, gold, silver, many items such as gasoline have gone down but come right back to where were. When a government spends it taxes inflation is the replacement tax on the income tax cuts Trump did.

Good post. I agree with what I understand. By that, I mean that I'm not sure whether the Fed buying bonds is the same as printing money, because I don't understand very well how money creation occurs.

[eccieuser9500]

Originally Posted by Tiny

Good post. I agree with what I understand. By that, I mean that I'm not sure whether the Fed buying bonds is the same as printing money, because I don't understand very well how money creation occurs.

[HedonistForever]

Originally Posted by Ripmany

If goes in bank account it will become a personal cushion, the bank then can loan out the money the bank pay litter interest for use of it. Yes putting money into money with federal reserve brought bonds is same as printing money. In inflation is here just it not on everything, look at price of jerky, lumber, rice, tobacco, bottled oil, lawyers, entery drinks, gold, silver, many items such as gasoline have gone down but come right back to where were. When a government spends it taxes inflation is the replacement tax on the income tax cuts Trump did.

The very first place I look!!!

[eccieuser9500]

[Strokey_McDingDong]

So millions of working class people lost a lot of their money and were totally screwed over ...

And where did all their money go?

[dilbert firestorm]

Originally Posted by gnadfly

Excellent analysis UC. The money is being spent by most. There's no option for them. Inflation is going to be a big bug a boo. The Fed is controlling it but eventually the market will take over.

When that happens and the foreclosure/eviction crisis happens Biden won't be able to handle the shitstorm.

that clip.. he's tried to justify the lockdowns as necessary.

[Strokey_McDingDong]

LOCKDOWN LOVER!