The Obama administration increased the money supply by over 300%. The Carter administration increased the money supply by only 13% and resulted in 18% interest rates. What do you think the results of a 300% increase in the money supply will have on the USD?
BottleCapKing, I think you have the relationship between money supply and inflation backwards.
The Effect of Money Supply on the Economy:
An increase in the supply of money typically lowers interest rates, which in turns generates more investment and puts more money in the hands of consumers, thereby stimulating spending. Businesses respond by ordering more raw materials and increasing production. The increased business activity raises the demand for labor. The opposite can occur if the money supply falls or when its growth rate decline.
Historically, the measure of money supply has shown that relationships exist between certain economic factors and inflation, which was used as a determinant of the future direction of price levels and inflation. However, since 2000, these relationships have become unstable, reducing their reliability as a guide for monetary policy. Although money supply measures are still widely used, they are no more important than the wide array of other economic data that economists and the Federal Reserve collects and reviews.
How Useful Is the Money Supply Measurement?
The money supply traditionally expanded and contracted along with the economy and inflation.
For that reason, the economist Milton Friedman said the money supply was a useful indicator. (Source: "Is the Money Supply Important?" The Board of Governors of the Federal Reserve System.)
But in the 1990s, that relationship changed. People took money out of low-interest bearing savings accounts and invested it in the stock market. M2 fell as the economy and inflation grew. Former Federal Reserve Chairman Alan Greenspan questioned the usefulness of the money supply measurement. He said if the economy were dependent on the M2 money supply for growth, it would be in a recession. For that reason, the Federal Reserve no longer sets a target for the money supply. (Source: "The Money Supply," Federal Reserve Bank of New York.)
Interesting factoid:
What Is the Current U.S. Money Supply?
In November 2016, M1 was $3.354 trillion. More than half was held in checking accounts. The rest ($1.4 trillion) was cash and traveler's checks. More than $1 trillion is in $100 bills. Another $300 billion is in $20 bills and other lower denominations. There's $300 million in higher-denomination bills that are collectors' items.
Banks don't hold that currency. It's all in circulation. That's $11,000 in cash per household. Most people use debit and credit cards instead of cash.
That means it's probably used by those who don't want their income reported to the IRS. That includes criminals, for whom a briefcase can hold a million dollars worth of $100 bills.
Of this, an astonishing two-thirds was held outside of the country. Many emerging market economies use the greenback as a substitute for their volatile currency. As many travelers know, a $20 bill is good throughout the world.
It could also include those who filed for Social Security disability benefits. An increasing number of people under 60 have done so since the recession. They may be working in underground jobs that only pay cash. That way they don't have to report it to the IRS and lose their benefits. (Source: Gene Epstein, "Cash Might Be Dethroned, But It Hasn't Gone Away," Barron's, May 18, 2015.)
M2 was $13.223 trillion.
Most of it ($8.7 trillion) was in savings accounts. Money markets held $712 billion and time deposits held $376 billion.
Use mode 9.
