Why do prices keep going up?
M2, money printing, and your paycheck.
The U.S. money supply grew from roughly $15.5 trillion in February 2020 to about $21.8 trillion by March 2022 - a 41 percent expansion in 25 months. Understanding that increase starts with what M2 measures and how banks create money.
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This page tells the story of the 2020-2022 money surge and what it means for savers. For the definitions of M0, M1, M2 and M3 and how bank lending creates deposits, see Money Supply Tiers (M0-M3); for the year-by-year chart, use the M2 vs Inflation Tracker.
U.S. M2 money supply expanded 41% in 25 months (Feb 2020–Mar 2022), from $15.5T to $21.8T, the largest peacetime monetary expansion in U.S. history. InflationinflationA general increase in prices over time, meaning each dollar buys less than it did before.Full definition followed ~18 months later, peaking at 9.1% in June 2022. By Jul 2026, M2 had recovered above the pre-QT peak at ~$23.2T.
- M2 measures all dollars usable as money: cash, checking, savings, money-market funds, and small CDs.
- Three forces drove the 2020–2022 expansion: Fed QEQuantitative Easing (QE)When a central bank creates new money electronically to buy government bonds and other assets, expanding the money supply. ($4.8T in asset purchases), fiscal transfers (PPP, stimulus), and bank credit creation.
- CPIConsumer Price Index (CPI)The government's measure of how much a typical basket of consumer goods costs over time.Full definition inflation peaked at 9.1% in June 2022, roughly 18 months after the steepest M2 acceleration.
- The Fed reversed course with QT in mid-2022, and M2 fell modestly for the first time in decades before resuming growth.
- Every dollar of M2 growth dilutes the purchasing powerPurchasing powerWhat money can actually buy, not the number on the bill or in the account. Inflation shrinks it over time: by the BLS consumer price index, it takes more than $8 today to buy what $1 bought in 1971. Same dollar, much less buying ability.Full definition of existing dollars, this is the core fiat problem.
M2 is the standard measure of how many dollars exist in the U.S. economy that are usable as money. Between February 2020 and March 2022, M2 expanded by about 41 percent - the largest peacetime monetary expansion in U.S. history. Three forces drove it: Fed asset purchases (QE), the Paycheck Protection Program and other fiscal transfers, and bank credit creation. Inflation followed roughly 18 months later, peaking at 9.1 percent in June 2022.
On this page
The 41 percent expansion in one chart
M2 is reported monthly by the Federal Reserve. Between the COVID shock and the start of quantitative tighteningquantitative tighteningThe reverse of quantitative easing. The Federal Reserve allows bonds on its balance sheet to mature without reinvesting, shrinking reserves and pushing up long-term rates. Began in 2022 alongside rate hikes., the line went near-vertical. After 2022 the Fed reversed course and M2 fell modestly for the first time in decades. By July 2026 M2 stood at approximately $23.2 trillion verify×DON'T TRUST, VERIFYClaim: M2 money stock was approximately $23.2 trillion as of July 2026.Verify at: FRED M2SL series ↗ · Federal Reserve H.6 release ↗ Source 1 in the list belowUpdated monthly. The H.6 release is the official Fed publication; FRED republishes the same series., about 7% above the 2022 peak after the QT-era contraction reversed.
What M2 actually counts
M2 is one of several official measures of the money supply. It is broader than M1 (cash plus checking and savings) but narrower than the total of all financial assets. The Fed defines M2 as physical currency in circulation plus the most spendable bank deposits.
M2 does not include large institutional money market funds, repo balances, Treasuries, or stocks. It is a measure of actual usable money - the closest thing to "the dollars that exist."
The 2020 to 2022 expansion in context
From 1959, when the modern M2 series begins, through 2019, M2 had never grown faster than about 13 percent in any single year. In 2020 it grew about 25 percent. By March 2022 the cumulative expansion since the COVID shock had reached approximately 41 percent. There is no peacetime precedent in U.S. history.
About three in every ten dollars in circulation in early 2022 were created in the prior 25 months. The CPI inflation that followed was not a mystery to anyone who had watched the M2 line.
Three forces drove the rise
M2 does not expand by itself. It expands when the Fed creates reserves and buys assets, when Congress sends out direct payments funded by Treasury issuance, and when commercial banks make new loans. All three ran simultaneously from March 2020 through 2021.
What happened when the Fed reversed course
In June 2022 the Fed began quantitative tightening - allowing maturing bonds to roll off the balance sheet without reinvestment, effectively destroying the reserves it had created. M2 contracted modestly through 2023 for the first time in modern history. The contraction was small in absolute terms but politically and economically significant.
By late 2024 M2 had resumed slow growth and is again above its 2022 peak. The 41 percent expansion was not undone. It was paused, then resumed.
Once new dollars exist, they don't typically un-exist. They get repriced into asset values, into wages, and eventually into the cost of everyday goods. The window between expansion and felt inflation is roughly 12 to 24 months.
What M2 means for a saver
If the supply of dollars grows faster than the supply of goods and services, the price of goods rises in dollar terms. That is not a theory - it is an accounting identity. The 2020 to 2022 expansion was visible in M2 in real time. The CPI response 18 months later was predictable.
For a long-term saver the question becomes: what fraction of your wealth is held in a unit (the dollar) whose supply can expand by 40 percent in 25 months, and what fraction is held in things whose supply cannot? Bitcoin's supply schedule is fixed at 21 million coins, growing on a decaying issuance curve. See Stock to Flow for the contrast.
Where to go from here
Sources
Verify badges in the text link to these sources. Figures, rates and rules change: check each source’s date before acting on it.
- Federal Reserve Bank of St. Louis FRED. M2 Money Stock (M2SL) - fred.stlouisfed.org/series/M2SL ↩
- Federal Reserve Statistical Release H.6, "Money Stock Measures" - federalreserve.gov/releases/h6
- Federal Reserve Statistical Release H.4.1, "Factors Affecting Reserve Balances" (Fed balance sheet) - federalreserve.gov/releases/h41
- Committee for a Responsible Federal Budget. "COVID Money Tracker" - crfb.org/project/covid-money-tracker
- Federal Reserve Board. "Reserve Requirements" announcement, March 2020 - federalreserve.gov/monetarypolicy/reservereq.htm
- U.S. Bureau of Labor Statistics. CPI-U headline series for the June 2022 9.1 percent peak - bls.gov/cpi
- Bank of England. McLeay, Radia, Thomas. "Money creation in the modern economy." Quarterly Bulletin 2014 Q1 - bankofengland.co.uk
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