Global Major Economies Currency Supply Growing Much Faster than Economic Growth, Long-Term Monetary Expansion Raises Concerns About Structural Risks

July 25th, data shows that since January 2004, the broad money supply (M2) of major global developed economies has grown significantly faster than nominal GDP:

Canada: M2 grew by 368%, GDP grew by 159%

United States: M2 grew by 279%, GDP grew by 171%

France: M2 grew by 258%, GDP grew by 84%

Eurozone: M2 grew by 211%, GDP grew by 102%

Japan: M2 grew by 90%, GDP grew by 25%

Analysis believes that over the past 20 years, low interest rates, quantitative easing, and large-scale fiscal stimulus from 2020 to 2021 have driven sustained global liquidity expansion. Central banks increasing the money supply, governments expanding deficits, and bank credit expansion have collectively created a long-term environment of monetary excess.

Some economists believe that due to the decrease in the velocity of money circulation and a large amount of funds flowing into the financial asset market, excess liquidity is more reflected in asset price increases rather than directly driving up consumer prices. However, in the long run, if money growth continues to outpace economic output, it may lead to asset inflation, currency devaluation, or future consumption inflationary pressure.

Among them, Japan is seen as an extreme case: a significant increase in money supply, but long-term low GDP growth and continuously low inflation levels; Canada, on the other hand, represents the other extreme, where monetary expansion is highly correlated with a real estate boom and rising household leverage.