I've heard some of the inflation hawks in the investment community citing this new record high in money supply …
The high of 2022 was surpassed a few months ago.
Does that mean raging inflation will re-emerge?
No. This is the chart that matters for inflationary pressures.
It's about rate-of-change.
The pandemic-era inflation shock came from the explosion in the rate-of-change in money supply. We had a decade's worth of money supply growth dumped onto the economy over a two-year period. That gave us the spike in the chart above.
Subsequently, we had 15 consecutive months of contraction in money supply. And with that, we had the disinflation trend that took the inflation rate back under 3%.
And now, money supply growth has normalized. In fact, it's still running slightly below the average rate of the 35-year period before the pandemic.
So, that is the inflation story. Tame.
