Money Supply Growth in August Slows Again, Returning to “Normal” Levels
Money supply growth slowed again in August, falling for the sixth month in a row, and to an18-month low. That is, money supply growth in the US has come down from its unprecedented levels, and has now returned to more “normal” levels. This comes after 13 months of unprecedented YOY growth in the money supply, coming in at over 20 percent in each month between April 2020 and April 2021.
During August 2021, year-over-year (YOY) growth in the money supply was at 8.2 percent. That’s down from July’s rate of 8.9 percent, and down from the August 2020 rate of 37.5 percent. Growth peaked in February 2021 at 39.1 percent.
Historically, the growth rates during most of 2020, and through April of this year, were much higher than anything we’d seen during previous cycles, with the 1970s being the only period that comes close.
The money supply metric used here—the “true” or Rothbard-Salerno money supply measure (TMS)—is the metric developed by Murray Rothbard and Joseph Salerno, and is designed to provide a better measure of money supply fluctuations than M2. The Mises Institute now offers regular updates on this metric and its growth. This measure of the money supply differs from M2 in that it includes Treasury deposits at the Fed (and excludes short-time deposits, traveler’s checks, and retail money funds).
Unlike the TMS measure, the M2 growth rate began to increase again in August, following five months of decline. M2 in Aug