“Global money printing is back,” The Kobeissi Letter analysts observe as they draw attention to the fact that the total global money supply has reached $89.7 trillion.
The increase is notable in the United States, the eurozone, Japan and China, notes the publication’s most recent report, highlighting that the increase has been about 7.3 trillion dollars during the last year alone.
In the United States alone, according to the media, the amount of money in circulation increased by $410 billion year after year to reach $21.2 trillion. This means that at the beginning of 2020, the money supply in the country was only 27% below its current levels.
It is about one of the strongest growth in three yearsis noted in the analysis of The Kobeissi Letter, remembering that the event has many similarities with the jump observed as an initial response to the Covid pandemic, during the first half of 2020.
After a downward trend, the money supply is constantly rising throughout 2024. Source: @kobeissiletter.
As analysts explain, it is most likely that this global money supply keep going upas a result of the tensions generated by the war conflicts between Russia and Ukraine to which the worsening of the war in the Middle East.
Experts believe this money supply will continue to rise “as central banks restart quantitative easing.” A measure that leads these entities to purchase securities on the open market, in their effort to reduce interest rates and increase the money supply.
It is worth remembering that the reduction in interest rates has been a decision taken – almost at the same time – by the central banks of the United States, the European Union and China.
Particularly, China’s commitment with monetary easing, along with the US Federal Reserve’s aggressive 50 basis point rate cut, They seek to give a new impetus to the market, to prevent it from being severely affected by the war.
The similarities with what happened at the beginning of the pandemic become clear, considering the way in which the growth rate of the money supply also increased in major advanced economies at that time.
Between January 2020 and January 2022, the money supply increased in the United States by 40.1%; in the euro area and the United Kingdom around 20%; in Japan 11.4%; and in Switzerland 8.2%. During the same period, the money supply in China and India increased by 20.2% and 22.6%, respectively.
The situation began to change in 2022 and 2023. In those years the money supply decreased in the United States, the United Kingdom and Switzerland, and remained relatively unchanged in the euro area and Japan. Although it continued to increase at an average annual rate of around 10% in China and India.
The money supply of most major world economies rose sharply with the pandemic. Source: voronoiapp.com.
What happens when the money supply increases?
As several economists point out, the repercussions of the increase in the monetary supply are diverse. In general, what is intended is to stimulate the economy, increasing the demand for consumer goods and services. This is because greater induced demand is intended to lead to greater production, expanding the economy.
However, one of the most notable effects is the increase in inflation rate. This result occurs If the money supply grows faster than economic output. In addition to inflation, changes in the money supply also influence the value of fiat currencies, which usually deteriorates rapidly, leading to devaluation.
As CriptoNoticias reported, these results were experienced in 2020 after launching one of the largest money printing operations in history. In this way, with the increase in the monetary supply, flooded the financial system with inorganic money and triggered global inflation. A fact that, in the long run, Bitcoin/”>was beneficial for bitcoin (BTC) which became one of the preferred assets as a haven of value.
The panorama is similar to the one currently presented, especially because with the growth of the monetary mass, the possibilities of inflation reappearing increase. Some of the results are visible: analysts already They warn about the depreciation of the dollarwhile investor interest in assets grows like gold and bitcoin.
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