Wednesday, February 24, 2021

Top Economists Warn That More Mad Money Printing is Coming This Year

Jay Powell

John Greenwood, chief economist at Invesco in London, and Steve H. Hanke, a professor of applied economics at Johns Hopkins University, are too polite to put on paper what they must really think of Federal Reserve Chairman Jay Powell's money printing madness, you really need to read between the lines of what they just wrote in The Wall Street Journal:

[Since February 2020,] the quantity of money in the U.S. economy, measured by M2, has increased by an astonishing $4 trillion. That’s a one-year increase of 26%—the largest annual percentage increase since 1943.

The looming danger for the economy isn’t only that the monetary printing presses have been in overdrive since the pandemic began, but also that they are already set for the same in 2021. A monetary surge for this year is locked in...

The U.S. money explosion isn’t over. Bank reserves, currently $3.2 trillion, will increase by about $1.4 trillion this year simply from Fed purchases of Treasurys and mortgage-backed securities at a promised $120 billion a month. In addition, the Treasury indicated in its February Refunding Statement that it will run down its Treasury General Account at the Fed by about $820 billion this year. This money will be spent through federal fiscal programs. These expenditures will further boost deposits counted in M2.

So we already know that the money supply will likely increase by at least another $2.3 trillion over the current year. In other words, even without any new lending or further purchases of securities by banks, the M2 money supply will grow by nearly 12% this year. That’s twice as fast as its average growth rate from 2000-19. It’s a rate that spells trouble—inflation trouble.

You don't generally find sound money advocates running the Federal Reserve Bank but Powell will likely go down in history as the most irresponsible leader of the Fed ever.

Also, it should be noted that the Fed pumpeteers, that is other Fed governors and Fed presidents of district banks, have raised no objections to the money printing.

The Fed is not going to be able to get away with what Greenwood and Hanke conservatively call "inflation trouble."

In the first phase, the money is hitting assets: the stock market, cryptocurrencies and housing.

As David Stockman recently put it:

[T]he Fed has transformed Wall Street into a giant, destructive gambling den, which is now sucking a growing share of the populace into the pursuit of instant get-rich speculations that have no chance of panning out.
Stated differently, the relevant pump and dump scheme is the one being foisted on
America by the lunatics at the Fed. You just can’t have stock market capitalizations
growing by orders of magnitude faster than national income—especially when you
measure from a starting point that was already pushing into the nosebleed section of
That has clearly been the case, however, since the pre-crisis peak in Q4 2007. The
broadest measure of stock market capitalization available is the Wilshire 5000 Total
Market Full Cap index, and its up 250% since October 2007.

 The consumer sector is next. 

Powell and his pumpeteers claim to see no serious price inflation coming.

On Monday before the Senate Committee on Banking, Housing, and Urban Affairs, Powell said:

The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved. 

The inflation "goal" Powell references is based on the bizarre idea that the Federal Reserve should have a target price inflation rate and that it should be 2.0%.

Consumer price inflation has been under 2.0%, as measured by government indexes, and so Powell and his pumpeteers believe they can average inflation up by allowing it to climb a little above 2.0%. The possibility that inflation may rapidly spike far above 2.0% given the amount of money they have already pumped into the system seems to not cross their minds.

It is as if they have been sniffing so much green ink that their logic has broken down to this:

Everything looks ok, man, and anyway, Janet Yellen's signature is about to start appearing on the currency instead of that of Steve Mnuchin. And there never has been strong price inflation when a woman has signed the currency.

So there. 



  1. So the thought leaders of America are telling us the fed will print more money. I wonder how they figured this out

  2. "Inflation goals" is synonymous with "devaluation and destruction of money goals."

  3. Back when I used to argue economics with mainstream bloggers, I would always ask, what is the scientific basis for a 2% price inflation goal? How does one know that an exact 2% rise in a specific set of consumer goods leads to the best possible outcome for an economy?

    Usually, I would get no answer. Every now and then someone would point to Friedman/Schwarz, whose correlations have long been discredited by broader analysis. And it still doesn't answer the question.

    Something about Irving Fisher and belieiving utility can be measured in finite steps... that old stock market genius..

    David B.

    1. The better question is: why is any level of inflation a good thing. Gee, in 10 years my $100 has a purchasing power of $80? So much for wanting to save. No real savings, no real growth.

    2. The scientific basis for a 2% inflation target is about as solid as the scientific basis for a six feet "social distancing" target.