Money supply growth rose slightly in November, rising above October's twenty-one-month low. Even with November's rise, though, money supply growth remains far below the unprecedented highs experienced during much of the past two years. During thirteen months between April 2020 and April 2021, money supply growth in the United States often climbed above 35 percent, well above even the "high" levels experienced from 2009 to 2013. As money supply growth returns to "normal," however, this may point to recessionary pressures in the near future.
During November 2021, year-over-year (YOY) growth in the money supply was at 7.0 percent. That's up from October's rate of 6.2 percent, and down from the November 2020 rate of 36.8 percent. Growth peaked in February 2021 at 39.1 percent.
Historically, the growth rates during most of 2020, and through April of 2021, were much higher than anything we'd seen during previous cycles, with the 1970s being the only period that comes close.
The money supply metric used here—the "true" or Rothbard-Salerno money supply measure (TMS)—is the metric developed by Murray Rothbard and Joseph Salerno, and is designed to provide a better measure of money supply fluctuations than M2. The Mises Institute now offers regular updates on this metric and its growth. This measure of the money supply differs from M2 in that it includes Treasury deposits at the Fed (and excludes short-time deposits and retail money funds).
M2 growth rates have been largely stable for the past sixth month, with the growth rate in November falling slightly to 12.7 percent. That's down slightly from October's growth rate of 12.5 percent. November's rate was well down from November 2020's rate of 24.4 percent. M2 growth peaked at a new high of 27.0 percent during February 2021.
Money supply growth can often be a helpful measure of economic activity, and an indicator of coming recessions. During periods of economic boom, money supply...