Nine Circles of Shell

Did America Really Print 80% of All Dollars Ever In 2020/2021?

You've probably heard at least one amateur deficit hawk in your life say something like "America has printed 80% of all dollars ever printed within the last two year!" as an explanation for the historic inflation rates of 2021 and 2022. While it's true that we have experienced extreme inflation in the last couple of years, it is not due to the US printing 80% of all dollars that have ever existed in the last two year, mainly because that has not happened.

The M1 and M2 Money Supplies

The 80% in the last two years number comes from watchers of the M1 money supply. The M1 money supply is a measure of dollars in circulation in the US, which prior to March 2020, included cash and checking accounts. Go ahead and take a look at the graph below of the M1 supply...

Looks pretty alarming right! You can clearly see the line basically go straight up in the beginning of 2020. Where did all that new money come from?

Well here is the thing: prior to March 2020, savings accounts were counted as M2 money, not M1. That changed as the Federal Reserve started counting savings accounts in the M1 money supply. If you go read their Q&A about it, they even acknowledge that "Recognizing savings deposits as a transaction account as of May 2020 will cause a series break in the M1 monetary aggregate." In other words, it will make the graph go straight up. The M1 supply jumped at the beginning of 2020 because of a definitional change of what would be counted as M1 money, not because we had the money printers go brrrrr. I mean we did, but not that much. The inflation we've experience, like basically all major inflation jumps in my lifetime, is largely due to high demand and low supply across markets. Oil, semi-conductors, building material... basically every commodity.

Deficit Hawks Are Bad for this Country

It's not just important to talk about this to be a know-it-all at parties, or to own relatives in debates or whatever. It's important because this cultural fear of printing to much money and causing hyper-inflation serves the right-wing and big corporations. If you can convince someone that it would take 14 to 15 trillion dollars printed in just one year to fund Medicare for all, that doing so would cause hyper-inflation, and that the Federal Reserve would be eager to do it, then you can pretty easily convince them not to support Medicare for all, despite all of that being untrue or highly misrepresentative.