Morgan Stanley: Brace For A Spike In Inflation As Congress Is Now In The Money Supply Driver’s Seat | WHAT REALLY HAPPENED

Morgan Stanley: Brace For A Spike In Inflation As Congress Is Now In The Money Supply Driver’s Seat

Just days after the famous (former) deflationista (turned reflationist) Russell Napier explained why he believes that central banks have "become irrelevant" in a world in which governments have taken control of the money supply, none other than Morgan Stanley's Michael Wilson (whose bullish market outlook on risk assets is predicated on the foundational view that the coming reflationary tsunami will lift all boats) has published a note agreeing with Napier and pointing out that not only is M2 exploding at a pace never seen before, but also writing that "Congress is now a critical player in driving money supply growth, given that the Fed has already committed to expanding its balance sheet as much as needed to support the recovery."

But how is that any different from the post financial crisis period when M2 also soared yet broad inflation failed to materialize (at least when measured with faulty CPI metrics)? Well, according to Wilson, "this time around, with the financial system in much better shape, and the direct intervention of Congress, there’s a real chance that the money multiplier doesn’t fall so much, and money supply growth remains elevated, thereby driving aggregate demand and inflation – i.e., nominal GDP growth."

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