Money Supply Surges to Multi-Year High as Fed Restarts QE

The latest CPI figures are not pretty, and consumers are feeling it. Despite what politicians and Fed governors say, US monetary policy is nowhere near “restrictive,” and we’re paying the price for it.

The following article was originally published by the Mises Institute. The opinions expressed do not necessarily reflect those of Peter Schiff or SchiffGold.

In spite of more than four years of claiming that price inflation was transitory, and that it would quickly return to the Fed’s two-percent target, the Fed has insisted on more easy-money policy over the past 18 months. In that time, the Fed has cut the target interest rate by 175 basis points and has returned to quantitative easing through monthly $40 billion purchases of Treasurys. Through it all, Fed Chairman Jerome Powell has repeatedly described monetary policy using some variation of “restrictive.” In his most recent FOMC press conference, for example, Powell described the Fed’s policy as “borderline restrictive” or “modestly restrictive.” To be fair, this suggests a slight movement away from Powell’s earlier dubbing of US monetary policy as “relatively restrictive” late last year, and as “clearly restrictive” before that. 

Indeed, it may be that current policy is “restrictive” compared to, say, the policies of Bernanke and Yellen. But recent data on the money supply suggests that the money supply in recent months is finding plenty of room to increase rapidly, in spite of what Fed officials say.  All these claims of restrictive monetary policy fail to ring true when we look at actual movement in the money supply.