Can't feel the affects of inflation yet because the money that has been added to the financial system has not started to move yet. If we look at the comparison M2 money has increased by over 100% since 2008 yet the flow or velocity of money is down 30%. Keeping in mind that since the start of 2020 there has been an increase of M2 money around 16%. While many assets crashed against the dollar showing signs of deflation even though on paper money supply should be causing inflation. That is caused by money not moving and as a result there can be a steep devaluing of the currency once people start to spend again.
"What is M2? M2 is a calculation of the money supply that includes all elements of M1 as well as "near money." M1 includes cash and checking deposits, while near money refers to savings deposits, money market securities, mutual funds, and other time deposits. These assets are less liquid than M1 and not as suitable as exchange mediums, but they can be quickly converted into cash or checking deposits." investopedia.com/terms/m/m2.asp
"What is Velocity of Money? The velocity of money is a measurement of the rate at which money is exchanged in an economy. It is the number of times that money moves from one entity to another. It also refers to how much a unit of currency is used in a given period of time. Simply put, it's the rate at which consumers and businesses in an economy collectively spend money. The velocity of money is usually measured as a ratio of gross domestic product (GDP) to a country's M1 or M2 money supply." investopedia.com/terms/v/velocity.asp
holy divergence... this is an incredibly concerning chart!
SaltyTeemo
⋅
@chickenboye, the money supply is grown typically to negate the effects of velocity reduction thus, creating the divergence you see here.
The issue here is that the velocity reduction in March 2020 was very large due too the COVID restrictions. The concept is when these restrictions are lifted velocity should recover.
However, the fiscally stimulated increase of M2 is likely permanent. This means that when velocity recovers we will likely get a large inflationary pulse throughout the economy proportional to the increase in money supply.
This effect would likely be noticeable to the normal consumer since the increase in money supply in the past year was historically aggressive.