Comment by anovikov
4 days ago
Ironically, there's no M2 expansion going on since Covid days and M2 to GDP is back to what it was pre-Covid and overall didn't even increase much at all even since GFC. It's only 1.5x of what it was at the bottom in 1997 when cost of capital was much higher than today. I think this concern is misplaced.
M2 is the wrong statistic for sure, but the thrust of GP's comment is accurate, IMO. Fed intervention has not remotely been removed from the economy. The "big beautiful bill" probably just amounts to another round of it (fiscal excess will lead to a crisis which will force a monetary bailout).
We should be using some kind of weighted total of all the things that get treated as money.
When a company makes a deal in exchange for shares or something, those shares are being used as money and must be included in any currency-neutral calculation of the money supply. However, most shares don't flow like money. You also have cryptos, which flow more than shares but less than government bonds and cash. It could be that the total of all money has expanded, even as the US dollar specifically stabilizes and slightly contracts.
Yeah I just threw out M2 because it's easily understood / harped on but it's certainly much more complicated than that.