M2 adjustment

M2 money-supply represents most of the money in circulation. It comprises of hard cash, digital bank accounts, checks and other paper assets handled as money like Treasury bills, municipal notes etc. M2 in circulation is reported by central banks.

Here we have an US M2 money-supply chart, in bilions of US dollars, source: tradingeconomics.com:

By dividing the M2 money-supply by its initial value (626.5 at the end of year 1969) we get chart showing how many times has amount of money in circulation increased since then (M2 money-supply growth rate):

Now if you divide prices by this rates you can see real prices cleansed from the money printing. This way we have something stable what we can use as a benchmark for measuring changes in prices. That is what I call “M2 adjusted”.

No commodity can provide such stable benchmark, because commodity itself can be over or under valued. For example: if there is 10 times more money in circulation, the benchmark is 10, public can’t come and move it to 20 because they think at 10 it is undervalued. It is not perfect method but a path to get closer to the truth. And definetelly much better method than rigged CPI.

In the year 2016 there is 21 times more money in circulation than it was back in the year 1970. By the way, out of this data is possible to calculate how fast is the amount of money in circulation growing, the result is 6.84% p.a.

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