Money-Supply Growth Hits 36-Month High

The “true money supply” measure is a measure of the money supply pioneered by Murray Rothbard and Joseph Salerno and is designed to provide a better measure than M2. The Mises Institute now offers regular updates on the TMS metric and its growth.1
Money supply can be a helpful metric in observing economic conditions. Historically, money supply has fallen prior to recessions and economic crises, and has risen during economic expansions.
Since 2014, money supply growth has ranged from about 7 percent to 8.5 percent. In October of last year, money supply growth hit a seven-year low of 6.8 percent, although this proved not to be an indication of any new trend. Overall, money supply growth has been quite stable over the past two years.
In July, however, money supply growth hit a 36-month high, reaching a year-over-year growth rate of 8.6 percent. Growth has not been as high since August of 2013, when growth reached a rate of 8.9 percent.
This data suggests that, in spite of a lackluster economy, the central bank’s reluctance to raise the target interest rate has helped in increasing the money supply, and may even help bring about the Fed’s target price-inflation rate of two percent.

This post was published at Ludwig von Mises Institute on Sept 13, 2016.