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The money supply went from about \$4 trillion in 2020 to about $20 trillion today. Where did all that money go?

When the money supply went from about \$1.4 trillion to about $1.7 trillion, I was worried. But, due to the Great Recession, I can understand how it would be necessary. Combined with all that fiscal spending, I reasoned that the economy was able to "absorb" the extra money supply. I speculated that all the extra cash eventually ended up being traded back and forth among the top .1%. Thus, the increase in stock valuations.

But, as the economy recovered, the Fed is supposed to take money back out of the economy, no?

And, now that the money supply is at astronomical amounts but without meaningful inflation (the 8% can be attributed to supply-chain issues), where did the money end up?

What are the possibilities of runaway inflation?

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    $\begingroup$ please change \$ to \\$ to fix the weird formatting $\endgroup$ May 23, 2023 at 18:43
  • $\begingroup$ what exactly you mean by where the money went? If you mean what individuals or organizations, or just even industries hold it that is impossible to figure out as there are no data for that. Also, where is your source for 8% being attributable to supply side issues? According to best data we have about 1/3 of US inflation is demand driven oecdecoscope.blog/2023/02/14/… $\endgroup$
    – 1muflon1
    May 23, 2023 at 18:51
  • $\begingroup$ I meant where the money went conceptually as a thought exercise. When the Fed increased the money supply, money flowed into banks and then into specific areas of the economy. Given that the amount of cash literally more than quadrupled, why didn't massive inflation occur? And, is this the reason why the Phillips Curve no longer is valid? Where did all the money go? $\endgroup$ May 24, 2023 at 5:10
  • $\begingroup$ Re: "\$4 trillion in 2020 to about \$20 trillion today" - where did you get those figures from? What type of money is that referring to? $\endgroup$
    – Mick
    Nov 11, 2023 at 15:04
  • $\begingroup$ @Mick It's M1. You can find the numbers everywhere. Here's one. Funny how this question aged well as inflation recently spiked. $\endgroup$ Nov 11, 2023 at 16:03

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The Fed began including savings deposits in M1 in May 2020. See Technical Q&As, specifically the items posted on 12/17/2020.

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  • $\begingroup$ Thanks for your helpful info. That's an important fact, but it might not be relevant here. Even if M1 was changed to include savings (which seems like the right move), wouldn't historical M1 numbers be adjusted accordingly (aka normalized)? In other words, charts would still accurately depict a drastic change. $\endgroup$ Nov 11, 2023 at 16:08
  • $\begingroup$ Actually they didn't adjust the historical numbers because the regulations for savings deposits were different before May 2020. But you could probably find historical data for savings accounts (as part of M2) and generate a pseudo-M1 history. $\endgroup$
    – Daniel
    Nov 11, 2023 at 20:00
  • $\begingroup$ I'm not saying you're wrong but it's so hard to believe the data guys would have overlooked this. I agree that the regulations would be different before May 2020, but I can't believe they wouldn't recalculate previous years based on the new regulation. Normalizing is usually the first thing statisticians do. $\endgroup$ Nov 12, 2023 at 15:50
  • $\begingroup$ I was surprised too. If someone wants to do an econometric study of, say, the relationship between M1 and inflation then they'll need a dummy variable for that change. $\endgroup$
    – Daniel
    Nov 15, 2023 at 21:27
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Certainly not to the people. Seems whoever got it used it to acquire real estate, which would explain why homes doubled recently, and the average person can't afford one anymore.

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  • $\begingroup$ Well, quantitative measures mostly benefit the top .1%. Money slowly trickles down (if at all). I hate to make this political but you can blame Republicans for most of this. They are constantly lowering taxes on the wealthy and reducing expenditure for the bottom 80%. Yet millions of Americans still vote for them evidenced by the fact that Republicans control Congress. $\endgroup$ Nov 10, 2023 at 19:01
  • $\begingroup$ Makes me wonder. Should Democrat politicians just lie to them and then do what's right for them? For example, should they say that Christianity belongs in schools and government even though they do not believe so and will not change laws in accordance? Right now, Republicans make false promises that hurt their constituents. At least, Democrats would be making false promises that benefit the populace. I'm being half-facetious and half-serious. $\endgroup$ Nov 10, 2023 at 19:06

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