M1 money is (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) traveler’s checks of nonbank issuers; (3) demand deposits; and (4) other checkable deposits (OCDs), which consist primarily of negotiable order of withdrawal (NOW) accounts at depository institutions and credit union share draft accounts.
The M2 measure of money is M1 plus (1) savings deposits (which include money market deposit accounts, or MMDAs); (2) small-denomination time deposits (time deposits in amounts of less than $100,000); and (3) balances in retail money market mutual funds (MMMFs).
Below is a graph of the M2 money supply. Since February 2020, M2 is up more than $4 trilion.
While the volume of money has grown rapidly, the velocity of money is at an all-time low. Inflation is not just about how many dollars are printed…it is about where those dollars go and how fast they are moving through the system.
This low velocity has kept inflation at bay….for the time being. The money is flowing into savings accounts . . .
Or going to pay down debt . . .