January 18, 2009

Is the Federal Reserve doubling the money supply in a year?

By: David Donadio

Brendan Conway sends George Melloan’s latest in the Journal, which delivers a jaw-dropper:

With a federal-funds interest-rate target near zero, the Fed has pumped tons of newly created dollars into the economy over the last four months. This has doubled the monetary base (bank reserves and currency), a phenomenal increase that has shocked market watchers and raised fears of inflation.

If you’re interested in why this is a big deal, Wikipedia has a good backgrounder on money supply.