Monday, March 8, 2021

Fun with statistics.................

That vertical line at the end of the chart represents the money supply - a 450% increase.  Scary? Inflationary?  Maybe, but not so fast.  Morgan Housel weighs in with some context:

Money supply has increased from $4 trillion a year ago to $18 trillion today.

A 450% increase!

That’s something you might see in a third-world country with hyperinflation.

But before you dump life savings into gold and build a bunker, here’s the punchline: The huge majority of the increase you’re seeing in this chart is not money printing or new money creation.

It’s an accounting rule change. . . .

Of the $14 trillion increase in M1, $11.2 trillion (80%) came from an accounting rule change that shifted money from savings accounts to checking accounts.

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