Federal Reserve Policy Masks Expansionary Monetary Shift

The U.S. monetary policy has been misunderstood by investors who focus solely on interest rates.

In reality, despite unchanged Federal Reserve policy rates for over two years, several indicators show that the money supply is growing rapidly again.

The M2 money supply reached an all-time high of $23.155 trillion in June, up 5.6% year-over-year, and the broader M4 aggregate is growing by 6.5%, indicating increasing liquidity throughout the financial system.

This trend precedes growth in the stock markets by a few months, suggesting that asset markets track the money supply more closely than interest rates.