The newest monetary base estimate was released by the Fed today. Many investors and analysts have become desensitized to ever increasing amounts of money in the economy, perhaps it’s time to take a step back and look at just how bad it’s gotten.
The Fed reported that today’s monetary base is roughly $3.2 trillion. That’s up more than 260% since November 2008. At that point, the monetary base had never breached $1 trillion, and was still only $0.875 trillion.
As you can see on the chart below, monetary base expansion has happened slow and smooth through recent history. What has happened in the last five years is completely unprecedented. In these times, when radical new policy measures seem to hit markets on a monthly basis, it’s easy to forget what a divergence they are. One look at the chart below should be a reminder of just how far we’ve diverged from history. That type of divergence can’t be healthy for the economy.