Can the injection of new money into the economic system enhance economic growth? Not really. Increasing (or decreasing) the money supply affects the demand for money but doesn't make us wealthier.
With negative growth now dipping below –5 percent, money-supply contraction is approaching the biggest declines we've seen in the past thirty-five years.
The fact the money supply is actually shrinking serves as just one more indicator that the so-called soft landing promised by the Federal Reserve is unlikely to be a reality.
We're now seeing the first time the money supply has actually contracted since the 1990s. The last time the year-over-year change in the money supply slipped into negative territory was in November of 1994.
During September 2022, year-over-year (YOY) growth in the money supply was at 3.92 percent. That's down from August's rate of 4.54 percent, and down from September 2021's rate of 7.02 percent.
The money supply is on a long and fast downward trajectory. This points toward recession and is just one more indicator of economic weakness in addition to negative GDP and an inverted yield curve.
During May 2022, year-over-year (YOY) growth in the money supply was at 6.97 percent. That's down from April's rate of 7.25 percent, and down from May 2021's rate of 15.4 percent. The growth rate peaked in February 2021 at 23.12 percent.
During April 2022, year-over-year money supply growth was at 7.23 percent. That's down from March's rate of 7.41 percent and April 2021's rate of 36.8 percent.
