US real M1, i.e., M1 deflated by the CPI, is falling faster than at any time in the last 100 years. The post WW2 decline in the inflation-adjusted time series was because war-time price controls were lifted and published inflation jumped to 20%, before falling back. In fact, it went negative---businesses had in fact raised prices too enthusiastically, which I suspect is happening again.
The Fed instituted a policy of "quantitative easing" during the Covid crash, which caused a big jump in money supply. Since it became concerned about inflation, it has reversed this policy, and this has reduced money supply. There was also a change in definition of money supply, but I have adjusted my data to reflect this.
If you argue that quantitative easing expanded the economy, leading to low unemployment, high growth and surging inflation, you must accept that "quantitative tightening" will lead to the reverse outcomes. There is no sign that real M1 has started to rise. If anything, its absolute decline is accelerating.
I think this is a major blunder on the part of the Fed, and will lead to a sharp decline in economic activity. The lags are long, but we should be starting to feel the effects of this singular plunge in real money supply from now on.
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