Hacker News Reader

Comment by snshn | Hacker News Reader

Print 50% of all existing USD in less than two years, then see rates go up up up. Color me surprised.

Americas anual GDP was $21t in 2020. Federal COVID relief funds were 4.6t over the span of 2 years according to https://www.usaspending.gov/disaster/covid-19?publicLaw=all

That's just over 10% of the GDP. Not a small amount by any measure but our numbers are rather different. What am I missing?

https://fred.stlouisfed.org/series/M1SL

The US Fed changed how M1 was defined in May 2020 - that's why the number jumped/changed (it spells it out right on that page

Before May 2020 M1 was defined as:

currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other checkable deposits (OCDs), consisting of negotiable order of withdrawal, or NOW, and automatic transfer service, or ATS, accounts at depository institutions, share draft accounts at credit unions, and demand deposits at thrift institution

After May 2020 M1 is defined as:

currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other liquid deposits, consisting of OCDs and savings deposits (including money market deposit accounts)

Can you explain the spike from those definitions, because I'm not getting it.

That's not what the Fed says.

>In late February and early March of 2020, the Fed cut its policy interest rate dramatically to help ease credit conditions during the COVID-19 crisis. The resulting acceleration in the supply of M1 can be understood largely as banks accommodating an increase in people’s demand for money.

https://fredblog.stlouisfed.org/2021/01/whats-behind-the-rec...

It's literally what the Fed says, it's nothing but a link to a Fed chart.

Yes they changed how it was measured around that time, but that didn't cause the substantial change in money supply. They didn't really change how it was measured that much. They say themselves it was due to increased demand for money.

GDP and USD are not the same thing. GDP measures production over a year (a timespan which is simply an artifact of our planet) in US dollars. It's a rate.

USD is the sum of US dollars in use. It's an amount.

Comparing a rate (defined by an arbitrary local constant) to an amount doesn't make much sense.

My googling for the sum of USD hasn't been fruitful if you don't mind providing a link.

I do take issue calling an anual arbitrary. It's a very common denominator used in finances. ie, you pay taxes anually. Don't attempt to tell the government it's arbitrary. To be pedantic, everything is arbitrary, even the value, the amount of, etc of USD, invadating this entire discussion.

As a society we agree upon things. A year is not an arbitrary unit of time.

Looks like the US has a tank with the same "name" as the real-money supply. But here's a link:

https://tradingeconomics.com/united-states/money-supply-m1

Personally, I doubt anybody putting much relevance on M1 or M1'. But that's a 20% change in 1 year, what is quite large and probably has had some impact somewhere.

Annual is arbitrary since it's a random fact of earth. If nothing else changed except we just happened to have a 6 month year, then GDP is half, and comparisons of that rate to an amount would now be completely different.

Comparing them is like comparing gallons as a number and speed of a car as a number, and ignoring that speed in mph or km/h or m/s will give different answers. Sure there are relations, but they're not comparable as ratios.

Reply on news.ycombinator.com