Forget about “Putin’s price hike” and price gouging by evil corporations, our friend Stephen Moore has a great article out in his Unleash Prosperity Hotline demonstrating that
monetizing the government’s massive $4.6 trillion spending spree is what has caused Bidenflation.
Mr. Moore quotes one of his favorite financial analysts, Scott Grannis, who has been tracking the growth of the monetary base since the start of the pandemic.
The charts below show that almost all of the excess spending – some $4.6 trillion over the past 30 months – was monetized. In other words, we paid for the spending almost exclusively by the Fed printing money.
Mr. Grannis posted the chart above which shows the level of the M2 money supply as of the end of April. Mr. Grannis says that as growth slows relative to its long-term 6% trend, the "gap" is shrinking. But it may take at least a year or two before it disappears, so he said, “I repeat what I said earlier this month: ‘M2 still has a lot of inflation potential’.”
The chart immediately above shows the year over year growth rate of M2. As noted above, M2 has hardly grown at all for the past three months, and the budget deficit is very likely to continue shrinking, so the year over year rate is almost certain to approach zero.
This third chart compares the growth of M2 to the level of the federal budget deficit. This is powerful evidence that the deficit was effectively financed by "money printing."
Mr. Grannis concluded by saying:
I hasten to add that this is arguably the first time in modern history that this has happened. Did the Fed allow this to happen? How exactly did M2 increase so explosively? Under our fractional reserve banking system, only banks can create new, spendable money; the Fed can only create bank reserves, which in turn are necessary for banks to create new money. Is Powell now being lauded for mopping up the mess he created? We don't know the full story yet, but I'm sure it will emerge.
Is it any surprise that inflation hit a near 40-year high this year with all the pandemic spending in 2020 under Trump and then Biden’s $3 trillion of added spending?
Biden denies that his spending blitz led to inflation, but these pictures show fairly conclusively the relationship between massive debt spending and the tidal wave of higher prices, observed Stephen Moore.
Federal Reserve
printing money
inflation
money supply
supply chain
federal budget deficit
pandemic spending