The Fed May Be Miscounting the Money Supply

By one metric, the money supply shrank in 2010 instead of expanding
The U.S. Federal Reserve building in Washington Photograph by Brendan Smialowski/Bloomberg

Even a third-grader knows that adding unlike things is problematic. Seven grapes and one watermelon do not equal one grape and seven watermelons, even though both are eight pieces of fruit. But the Federal Reserve persists in adding different kinds of money as if they were identical: assets that are easily spendable and ones that aren’t; ones that earn interest and ones that don’t.

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