Money Creation: 70% in the Last 12mo (Fed, M1, $)

If everyone has enough that they don't need to work any more, then the economy will start signalling to people to stop producing resources because they aren't needed (by lowering prices and reducing production). Rather than making the obvious connection that most people have what they need and lower prices will free up resources for people with very limited means, the mainstream thought seems to list towards savings & retirement being an adversary that must be defeated because the GDP might drop.

Basically if people stop working because they don't have anything they want to work for, economic output will drop in a way that can only be described as good. My interpretation is economists & government aren't ready for that idea so have declared an ongoing war against retirement (and - by extension - savings).

[0] https://en.wikipedia.org/wiki/Paradox_of_thrift

I think the key thing here is to look at is increase of bank deposits (I.e. money for you and me). That is M2 MINUS central bank reserves and notes and coins in circulation. If you look at this you'll see that bank deposits have only increased modestly despite the large increase in M1. From this you can infer that the FED's "money printing" isn't really affecting Main Street very much. I.e. currently not causing much inflation.

What's happening? The FED is creating new reserves and using those to buy bonds. The reserves remain in financial institutions and should incentivise banks to lend - or at least that is the theory. Lending is how bank deposits (money for you and me) are created. The reserves which the FED creates to buy bonds (which are assets of commercial banks) doesn't end up in people's Bank accounts (which are liabilities of commercial banks). Instead, the reserves remain sloshing around in the banks.

My view is that money supply is endogenous. That is, new bank deposits are created when new loans are made. Currently, there is not a demand for loans so there won't be a huge increase in the M2 money supply as a result of these FED bond purchases. Perhaps demand might increase in the future, in which case the US will see inflation. I suspect once the economy recovers and inflation (as measured by the FED) increases then they'll start performing open market operations to sell the bonds they bought and thus remove the excess reserves from the financial system.

Edit: Indeed. M1's definition: "M1 includes funds that are readily accessible for spending. M1 consists of: (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. Seasonally adjusted M1 is calculated by summing currency, traveler's checks, demand deposits, and OCDs, each seasonally adjusted separately.

I agree with this line of argument for the 2008 era quantitative easing! But my read is that M1 explicitly excludes bank reserves, so the M1 created can't be locked-up reserves, right?