{"id":14047,"date":"2020-05-04T13:48:30","date_gmt":"2020-05-04T12:48:30","guid":{"rendered":"https:\/\/lazardfreresgestion-tribune.fr\/?p=14047"},"modified":"2020-05-04T13:50:04","modified_gmt":"2020-05-04T12:50:04","slug":"united-states-money-creation-at-its-highest-since-world-war-ii","status":"publish","type":"post","link":"https:\/\/latribune.lazardfreresgestion.fr\/en\/united-states-money-creation-at-its-highest-since-world-war-ii\/","title":{"rendered":"United States: money creation at its highest since World War II"},"content":{"rendered":"

Chart of the week<\/h2>\n

Money growth has risen sharply due to the Federal Reserve\u2019s response to the Covid-19 crisis and the fact that economic agents have increased their cash deposit levels to safeguard liquidity or reduce spending.<\/p>\n

In the last twelve months, money supply has grown at its highest rate since World War II. M2\u00b9 grew 16% YoY, 9% over the last two months only. This pace is likely to remain high in the coming months.<\/p>\n

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Our analysis<\/h2>\n

What impact will such massive money creation have on the economy and on inflation, in particular? Although the last few years have shown that the relationship between money supply and inflation is not straightforward, the current acceleration is unprecedented.<\/p>\n

This rapid increase is currently cushioning a severe deflationary shock and the money velocity has fallen sharply, in line with activity levels. The question will really arise when business levels recover, with the stance adopted by the Federal Reserve also key. Against this backdrop, it is too early to hazard an answer, but the next few years will provide an opportunity to revisit some of classic economics questions.<\/p>\n

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\u00b9 M2 corresponds to M1 (coins and banknotes in circulation and overnight deposits) + passbook deposits and short-term loans.<\/p>\n

 <\/p>\n

See also :<\/p>\n

China’s awakening<\/a><\/p><\/blockquote>\n