The monetary supply is built on debt and is roughly 25x leveraged.
The Fed has learned a lot from the GFC. We are in a pandemic and yet nobody is really screaming about unemployment or inability to pay the mortgage.
QE is done to allow banks and business to keep the collateral against the debt afloat. If they don’t do QE the sell off lowers prices which means the collateral against loans vanishes and debt is called in and we have a massive collapse —> GFC.
Stimmy is done so average person still has a job. Many govts around the world had initiatives funding 30%+ of salaries. In addition they provided stimmy handouts, stimmy rebates. This allows average people to keep paying loans and not default = collateral value against loans is saved.
Go back a number of months and I noted the US govt has changed their annual wages figure to include their employment PLUS stimmy money = wage growth. I find that quite an interesting metric as since when do govt stimulus become part of wage metrics.
Just remember that US 20% is based on M2 so you’ll see only shorter term stuff. Here we did 22% M2 but the M3 increased by 14% which tells you The money in for long term is exiting and deleveraging the money supply. The gap might not look like much but 8% is greater than the annual M3 increase for the last decade.
Here our money supply increase is inline with the 1970s. Scared to do more I guess. The interest rate increases will be interesting, if it’s a reset then those will stay and slowly climb.