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What the Great Global Money Pump of 2020 Looked Like

(Economic Policy Journal) At Bloomberg, Robert Burgess explains what drove the stock market and general asset price spike of 2020:

$14 trillion. 

That’s the amount by which the aggregate money supply has increased this year in the U.S., China, euro zone, Japan and eight other developed economies. To put the surge in perspective, the jump to $94.8 trillion exceeds all other years in data going back to 2003 and blows away the previous record increase of $8.38 trillion in 2017, according to data compiled by Bloomberg…  

As of Nov. 30, the collective balance sheet assets of the Federal Reserve, the European Central Bank, the Bank of Japan and the Bank of England stood at 54.3% of their countries’ total gross domestic product, up from about 36% at the end of 2019 and about 10% in 2008, data compiled by Bloomberg show.

The Fed alone is pumping at least $120 billion a month into the financial markets through its purchases of fixed-income assets.

It is very difficult to think that this massive money pump won’t eventually result in accelerating consumer price inflation in 2021. When you have fractional reserve banking and the new money is pumped into the system via the banking system, first, you get the asset price explosion and then, down the road, the consumer price explosion.

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