Fantastic Analysis of the Money Supply

by Robert Wenzel, here.

His key point is that the monetary base is not the money supply. The monetary base is useful for understanding the potential of the money supply to expand, but the money supply is the amount of money that is actually out in the real economy. Money “parked” at the Federal Reserve as excess reserves are not physically in the economy. Considering this, it is no surprise that price inflation has not yet jumped to high levels when 1.7 trillion/2 trillion of the Fed’s printed money is being held as excess reserves. If this money leaks out, you could see drastic price inflation, eventually forcing the Fed to pull back and raise interest rates, driving the economy into the dirt.

It is worth reading this and looking at the data Wenzel cites to get a proper grasp of the money supply yourself.

Advertisements

Posted on May 6, 2013, in Economics and tagged , , , . Bookmark the permalink. Leave a comment.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: