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IPFS News Link • Economy - Economics USA

Never Go Full Weimar: America's Monetary Base Has Grown 6 Times Larger Since 2008

•, By Michael

If we continue down this road, it won't be too long before we start looking like Germany during the Weimar Republic.  But if we stop creating money at a feverish rate, we won't be able to service our debts and we will plunge into a very deep economic depression.  Those that run things desperately want to avoid short-term economic pain, and so they just continue to take the easy way out.  Unfortunately, taking the easy way out time after time will only lead to heartache.

Instead of examining M1 or M2 as many others tend to do, in this article I am going to look at our monetary base.  If you are not familiar with that term, the following is how Investopedia defines it

The monetary base is the total amount of a currency in circulation or held in reserves. Money in circulation is anything that is held and used by the general public while reserves refer to commercial bank deposits and any money held in reserves by these institutions at the central bank.

For most of our history, the growth of our monetary base was very stable.

But then the financial crisis of 2008 arrived, and it started growing at an exponential rate.

As you can see from the chart below, the size of the monetary base went from less than a trillion dollars in 2008 to nearly six trillion dollars today…

There tends to be a lag between when the monetary base rises and when we see prices increase throughout the economy.

For example, the dramatic spike in the monetary base that we witnessed in 2020 did not immediately cause prices to soar.

But in 2021 and 2022 we certainly felt the pain.

Throughout 2022, the size of the monetary base was actually falling as the Federal Reserve attempted to battle inflation, and that resulted in prices moderating to a certain extent in 2023.

Unfortunately, the size of the monetary base started to go back up in early 2023, and now it is rising very sharply once again.