Money Creation / by urbanexus

ECON - 2009-10-10 - Money supply in the USA On October 9, 2009, The Calafia Beach Pundit (Scott Grannis) posted this chart and an explanation at his blog (http://scottgrannis.blogspot.com/). It illustrates the dramatic expansion of the monetary base in the USA during the year since the near collapse of the financial system. The Monetary Base (currency plus bank reserves), is now at an all-time high.

Grannis points out that all this money creation has yet to create inflation because most of it went into newly-created bank reserves that remain on the Federal Reserve balance sheet. Despite the increase in the money supply, there is little new lending. The big question is whether the Federal Reserve will be able to shrink the money supply as we move into recovery. If not, it seems like are in for some dramatic inflation.