As those regular readers of this publication will know, we have long lamented the meteoric rise in money supply and the excess inflation created by extraneous amounts of fiscal stimulus heaped upon a postpandemic economy already on the mend. Indeed and during the pandemic years of 2020 and 2021, a key measure of money supply known as M2, which is comprised of currency and coins in circulation, checking and saving accounts, money market accounts, certificates of deposit as well as other liquid deposits, ballooned by over 40%, or approximately $6 trillion. Naturally, this triggered a buying frenzy by both the employed and unemployed that far exceeded the capacity of an already diminished supply-chain, as producers and logistics companies alike struggled with raw material and labor shortages, pressuring goods prices sharply higher through the first half of 2022. After the FOMC’s inexplicable delay in tightening monetary policy based upon their ‘transitory’ theories regarding the fastest inflation in over 40 years, Powell and company started raising rates last March and ultimately heaped on 425 basis points of rate hikes last year, which has swung the money supply pendulum decidedly into contractionary territory
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