The implementation of pandemic-induced stimulus measures in the United States has led to an unprecedented situation, with the central bank printing nearly 80% of all dollars currently in circulation since the year 2020. According to recent analysis from macroeconomic commentary source The Kobeissi Letter, the volume of dollars in circulation has surged by a staggering 375% over a mere three-year period.
At the onset of 2020, when COVID-19 lockdowns were being enforced worldwide, the total amount of money in circulation amounted to $4 trillion. Today, that figure has ballooned to nearly $19 trillion within the M1 category, as reported by The Kobeissi Letter. The rapid money printing initiative aimed to provide financial relief to those who were adversely impacted by the economic repercussions of the pandemic-induced lockdowns.
However, the surge in the money supply has come at a cost. The significant expansion of the money supply has led to currency devaluation, resulting in surging prices and inflation. The purchasing power of the dollar has diminished, with today's dollar affording less than what it could have five years ago.
While the US economy has experienced a recent decline in the money supply, the economic consequences of this significant expansion are likely to persist. US inflation, which experienced a year of monthly decreases, resurged in July to 3.2%. Federal Reserve Chairman Jerome Powell acknowledged the need to raise interest rates "if appropriate" to tackle persistently high inflation.
Despite these economic challenges, the US dollar remains a dominant force in international transactions, accounting for a recent peak of 46% according to Bloomberg data. However, the trend of de-dollarization is gaining momentum as more countries explore alternative currencies for trade and investment. Last week, the President of Brazil called for the BRICS nations to establish a common currency for trade and investment, aiming to enhance payment options and reduce vulnerabilities associated with the current global currency system.
