MONEY CLASS OF THE DAY: The Fed Did NOT Grow Money Supply 4x During the Pandemic \ stacker news ~econ

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MONEY CLASS OF THE DAY: The Fed Did NOT Grow Money Supply 4x During the Pandemic

25.1k sats \ 37 comments \ @denlillaapan 21 Oct econ

I edit Bitcoiners writing about the monetary system all day long.

(My credentials include having edited Lyn Alden's masterpiece Broken Money --https://www.lynalden.com/broken-money/ -- and Aaron van Wirdum's The Genesis Book and more.)

I have spent my adult life reading and studying money, monetary regimes, and how the banking system works.

There is a myth that I fear will cripple Bitcoiners thinking about money for a generation or more. It's an error that I predict I'll have to keep correcting in my professional life forever. So here's my meek attempt at preempting it:

80% of all dollars were NOT created during the pandemic. The Fed did NOT expand the money supply by hundreds of percent during 'rona. They printed crazy amounts of money, alright, but NOT BY THAT MAGNITUDE.

What happened is that the Fed re-classified the way it treats the liquidity of various instruments and thus included some things in M1 that used to be only in M2. Thus you got graphs like these:

(source: https://fredblog.stlouisfed.org/2021/05/savings-are-now-more-liquid-and-part-of-m1-money/)

So, a Bitcoiner not really knowing that they're talking about, pulls up a graph of M1 (the red line) -- because that sounds like a base-money type of thing, right? -- and sees a GINOURMOUS explosion in 2020. _From $4trn to $16trn, jeez these central bankers really printed that shit!

Yes, yes they did... but not 4x. What they did is they accounting-wise moved some things that used to be in the green line to now also be in the red line. If you check the numbers in the link, that broader metric of money supply goes from $15.3trn to $17.85 trillion during the spring of 2020 -- a 16% growth in a few months. They continued this monetary expansion until April 2022 for a sum total of 40.7% money supply increase.

That's today's little money lesson. Peace, J

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43 sats \ 6 replies \ @south_korea_ln 21 Oct

Keep these money lessons coming. If Bitcoiners want to be taken seriously, they must work with accurate numbers. Thanks.

21 sats \ 1 reply \ @denlillaapan OP 21 Oct

definitely! We need to understand the system we seek to overthrow better than the incumbents trying to defend it

0 sats \ 0 replies \ @zapsammy 21 Oct

there's nothing to understand. these are spiritually immature children playing around with people's lives, dangling made-up rules for unsuspecting people to follow. why keep up with the changes to every edition of monopoly? why?

study bitcoin and common sense, that should be enough to keep busy,

0 sats \ 2 replies \ @zapsammy 21 Oct

do u imply that the numbers coming out of the politician's black boxes are serious and accurate?

55 sats \ 1 reply \ @denlillaapan OP 21 Oct

there are degrees of inaccuracy. FDA recommendations for nutrition? Crap. FRED or Treasury numbers of (physical) dollar notes in circulation? Pretty accurate.

26 sats \ 0 replies \ @zapsammy 21 Oct

the number of physical papers bills means nothing in comparison to electronic digits on all kinds of ledgers, public & private. do not forget how the pentagohn always fails audits. also, did u personally go and count the paper bills? i don't think so.

fiat numerology.

0 sats \ 0 replies \ @siggy47 21 Oct

This

23 sats \ 0 replies \ @zapsammy 21 Oct

central banking numerology is not mathematical economics, it's a religion designed to manipulate the masses, it's Fiat.

62 sats \ 5 replies \ @siggy47 21 Oct

Thanks for this explanation. BTW, you edited my two favorite bitcoin books, so I know you know what you're talking about. I hope you decide to post these lessons regularly. We will all benefit from your knowledge.

53 sats \ 4 replies \ @denlillaapan OP 21 Oct

appreciate it! is an honor to work with these greats

43 sats \ 3 replies \ @realBitcoinDog 21 Oct

And @denlillaapan edited your soon-to-be third favorite Bitcoin book too, right @siggy47?

53 sats \ 0 replies \ @denlillaapan OP 21 Oct

didn't wanna brag too much @realBitcoinDog... :)

10 sats \ 1 reply \ @siggy47 21 Oct

21 Futures?

43 sats \ 0 replies \ @realBitcoinDog 21 Oct

Bitcoin Girl: Save the World edited by @denlillaapan https://www.amazon.com/Bitcoin-Girl-Save-World-Dog/dp/B0BS8XB72K/

But yes I have a short story in 21 Futures: tales from the time chain where @21futures is the editor

21 sats \ 4 replies \ @netstatic 21 Oct

Who was saying it 4x'ed? lol

23 sats \ 3 replies \ @denlillaapan OP 21 Oct

I've seen claims like this (the precise number is often different, but the same confusion) a half-dozen times by various authors.

Just now it came from Scaramucci's new Bitcoin book (that I have an ARC for, #hashtag #important) https://www.amazon.com/Little-Book-Bitcoin-Already-Figured/dp/1394286643

10 sats \ 2 replies \ @realBitcoinDog 21 Oct

Is the Mooch really Bitcoin only? He claimed to be a couple years ago

84 sats \ 1 reply \ @south_korea_ln 21 Oct

In this book, readers will learn about:

Hashes, blockchains, and mining, and how these three processes sync up like an orchestra to make global participation in crypto possible

Bitcoin as digital gold, and its similarities and differences to other cryptocurrencies like Ethereum

Trading different cryptocurrencies, both popular and lesser known, through centralized platforms like Binance and decentralized finance (DeFi) platforms like Uniswap

He isn't. And with a foreword by Saylor, this also says a lot about Saylor.

0 sats \ 0 replies \ @realBitcoinDog 21 Oct

Thanks for sharing! Yea go figure. #SlayYourHeroes

20 sats \ 1 reply \ @0200374f73 21 Oct

Thanks for the dose of sanity. The Fed gets wayyy too much flak among bitcoiners and it makes us look naive. The vast majority of 'money supply' expansion is via the extension of credit by private banks worldwide. This dwarfs anything you'll find on FRED. If you want to blame the government for something, blame congress for fiscal largess. They spend without consequence, throw the funding problem over the wall to Treasury, who auctions off debt, some of which the Fed mops up. Follow Jeff Snider if you're curious about this stuff. I'm just repeating him.

21 sats \ 0 replies \ @denlillaapan OP 21 Oct

Agree fully with your first statement (and your latest few) ...but then ironically, you do exactly what you accuse Bitcoiners of: M2 includes private banks expanding credit. (edit: Ugh...Yes yes, Jeff Snider and eurodollars -- saw that portion of your comment after pressing send lol -- nobody can verify the number of "dollars" in the system, so with this view it's pretty unclear what "a dollar" even is).

Also appreciate your emphasis on fiscal. Agreed. I wrote something aggressive along those lines in a Bitcoin Magazine Print review of Jimmy Song's book. Money printing (even if we include all deficits, since they're in part facilitating by Fed backstop) are max one-third of fiscal expenditures. (I've written on that when attack Saif too: https://aier.org/article/everything-is-the-feds-fault-a-review-of-the-fiat-standard/)

U.S. gov has a spending problem, in addition too its money printing problem.

Anyway, appreciate you comment

10 sats \ 1 reply \ @realBitcoinDog 21 Oct

Psh yea not a 400% increase, only a tiny baby 40% increase :P

What’s not priced in: if Bitcoin has a move from $50k to $1M, that’s a 2000% increase!!

Makes me laugh when “legend” Michael Burry writes 429% on the white board at the end of The Big Short. That’s nothing for Bitcoin!

21 sats \ 0 replies \ @denlillaapan OP 21 Oct

indeed

0 sats \ 3 replies \ @xz 22 Oct

Why are 'savings now more liquid and part of M1 money' ?

Is this to imply savings are being raided, i.e due to inflation in the price of everything and the general mismanagement of the economy, or Fred reclassified M1/M2 just for the lulz?

Curious! I have Broken Money. I have not read it yet.

21 sats \ 2 replies \ @denlillaapan OP 22 Oct

No, it's merely a classification; statisticians say things.

Assets have "moneyness" -- think of them as a sliding scale of how much moneyness they have.

In the 20th century economists used to think that savings accounts were not money, since spending from them was tricky -- involved fees, took days etc. In modern times, not the case; savings accounts and spending accounts are so blurred among financial institutions and very easy to move between.

The piece is pretty clear on it

https://fredblog.stlouisfed.org/2021/05/savings-are-now-more-liquid-and-part-of-m1-money/

0 sats \ 1 reply \ @xz 22 Oct

Thank for that. Explains it clearly.

I'm still a little confused in my mind, why the shift, or why now. Traditionally, savings were not as easy to access. That's easy to understand. But for example, a savings instrument like an ISA (individual-savings-accounts) have certain restrictions for just that reason, your money needs to be locked-up to earn a cerain interest threshold, encouraging to keep deposits in a bank. Or, say some gold holding. I could see that as being potentiallty more liquid today, but still, it would require several days notice in many cases to sell and deposit in a bank account. Also, people would be more reluctant to sell something like that, so I guess it's moneyness (which I understand means currency) would be much lower. So, are we including such things?

Anyway, you don't need to answer that. But I think this is why I feel there's some confusion.

0 sats \ 0 replies \ @denlillaapan OP 22 Oct

Moneyness: is just an academic term for how money-like a certain thing is. It's precisely what you're describing: how close to being capable of money services is gold? ISAs? Stocks? Treasury bills? If you're a big bank, you can repo Treasury bills; if you're Apple you can pay with newly printed Apple stocks. Some retail brokerage accounts lets you visa-debit card swipe from your index fund holdings.

It's essentially a measure of liquidity and usage, and it's veeeery arbitrary.

I can't account for the shift, either. My best guess is that it's a bureaucratic-statistical decision and it was time. The timing -- mid-pandemic -- was of course awful and has confused looots of people.

0 sats \ 0 replies \ @jgbtc 22 Oct

Wow, imagine how bad things would be if they had actually 4x'd the supply. Because however much they increased it really screwed things up bad.

0 sats \ 3 replies \ @Solomonsatoshi 21 Oct

40% money supply increase however also implies what?
40% debasement and ~ 40% price inflation?

0 sats \ 2 replies \ @denlillaapan OP 21 Oct

implies not very much. Retail, consumer prices can rise proportionately more or less than the expansion of the money supply. Also matters how and where the new money enters the system.

An economist would say that its "velocity" determines to what extent an Ms increase translates into prices, and also real productivity improvements reduce them at the same time

0 sats \ 0 replies \ @Solomonsatoshi 22 Oct

'The U.S. construction industry has faced its share of challenges in recent years.

Construction costs still sit close to 40% higher than in February 2020, before the onset of the COVID-19 pandemic. Meanwhile, labor shortages continue to negatively impact construction momentum, according to a recent Associated General Contractors of America report.'

https://www.constructiondive.com/news/how-us-construction-left-the-world-behind/728178/

0 sats \ 0 replies \ @Solomonsatoshi 21 Oct

Nevertheless it HAS resulted in about 40% increase in consumer prices.

0 sats \ 1 reply \ @jddska 21 Oct

Do you have some thoughts on the brics movements and gold? It's really interesting what's going on now, and trick to say "ah ha, gold is up 40% in the last 12 months, so the fed must be printing a lot".

0 sats \ 0 replies \ @Solomonsatoshi 21 Oct

Chinas CBDC is already operational with in China and providing trade payments liquidity for nations like Russia and Iran who are now captive tribute states to China via its mercantile and monetary systems.

This Chinas CBDC Yuan already operates its alternative to SWIFT and is the almost inevitable protocol to form the basis of any BRICS monetary challenge to USD SWIFT.