<p>US doesn't have reserve requirements anymore since late 2010s. It is virtually impossible to trace this to specific source from macro data.</p>
<p>The <a href="https://fred.stlouisfed.org/series/CCLACBW027SBOG" rel="nofollow noreferrer">lending</a> in US did increase so it could be partially due to increased lending. Another reason is the increase in <a href="https://fred.stlouisfed.org/series/CURRCIR" rel="nofollow noreferrer">currency in circulation</a>, which is controlled by the treasury.</p>
<p>However, due to endogenous nature of broader money supply its not really possible to track where every single dollar comes from, but I believe the above, likely explains great portion of recent increase.</p>

CC BY-SA 4.0
2024-10-02T13:58:52.467Z
These two charts only show an increase of about 30 and 24 billion USD while M2 has increased by over 400 billion USD since February 2024.
user142
CC BY-SA 4.0
2024-10-02T14:04:35.070Z
@user142 yes but as explained in my answer there is no way to get 1:1 correspondence. For example, when loan is created that increases money supply but as the money is spent and deposited that again increases money supply. Similarly, that increase in currency endogenously increase also demand for lending from non-banking institutions that does not show on that statistics. Furthermore, I do not have data for all types of lending by banks, I showed data for consumer lending, and just assumed other lending will follow same pattern (which is not crazy unreasonable assumption). In case you look
1muflon1
CC BY-SA 4.0
2024-10-02T14:05:39.963Z
for answer that will explain every single dollar, I am afraid that is literally impossible. There isnt some simple accounting correspondence between these aggregates.
1muflon1
CC BY-SA 4.0
2024-10-03T11:07:00.057Z
“Loans and leases in bank credit” on the Fed H8 report table 3 has increased by about 150bn since Feb 2024.
dm63
CC BY-SA 4.0
2024-10-02T13:43:57.850Z
2024-10-02T13:43:57.850Z
1muflon1
<p>First off, I'm not an economist, I'm just trying to understand how the global monetary system actually works, so I might get some things wrong here.</p>
<p><a href="https://fred.stlouisfed.org/series/M2SL" rel="nofollow noreferrer">The US M2 money supply has been growing for the past 6 months</a> and I'm struggling to understand why. All the metrics I usually look at seem to indicate a shrinking money supply. <a href="https://fred.stlouisfed.org/series/WALCL" rel="nofollow noreferrer">The balance sheet of the Federal Reserve is shrinking</a> which means they are reducing their assets and thereby taking reserves out of the system (Quantitative Tightening). <a href="https://fred.stlouisfed.org/series/RRPONTSYD" rel="nofollow noreferrer">The reverse repo has been relatively stable over the last 6 months</a>. <a href="https://fred.stlouisfed.org/series/WTREGEN" rel="nofollow noreferrer">The Treasury General Account also has been relatively stable over that time period</a>. This all makes me wonder where that increase in M2 is actually coming from. Is it just the banks lending more money? But aren't they constrained by the amount of bank reserves in the system? Or is it foreign governments reducing their USD holdings? Which charts do I need to look at to understand where this increase in M2 is coming from?</p>

<money-supply>
Where is the recent increase in US M2 coming from?
user142
# Where is the recent increase in US M2 coming from?

(Asked by: username_0 on 2024-10-02)

First off, I'm not an economist, I'm just trying to understand how the global monetary system actually works, so I might get some things wrong here.

[The US M2 money supply has been growing for the past 6 months](https://fred.stlouisfed.org/series/M2SL) and I'm struggling to understand why. All the metrics I usually look at seem to indicate a shrinking money supply. [The balance sheet of the Federal Reserve is shrinking](https://fred.stlouisfed.org/series/WALCL) which means they are reducing their assets and thereby taking reserves out of the system (Quantitative Tightening). [The reverse repo has been relatively stable over the last 6 months](https://fred.stlouisfed.org/series/RRPONTSYD). [The Treasury General Account also has been relatively stable over that time period](https://fred.stlouisfed.org/series/WTREGEN). This all makes me wonder where that increase in M2 is actually coming from. Is it just the banks lending more money? But aren't they constrained by the amount of bank reserves in the system? Or is it foreign governments reducing their USD holdings? Which charts do I need to look at to understand where this increase in M2 is coming from?

**Tags:** money-supply


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## 1 answers

### Answer by username_1 on 2024-10-02. Score: 0

US doesn't have reserve requirements anymore since late 2010s. It is virtually impossible to trace this to specific source from macro data.

The [lending](https://fred.stlouisfed.org/series/CCLACBW027SBOG) in US did increase so it could be partially due to increased lending. Another reason is the increase in [currency in circulation](https://fred.stlouisfed.org/series/CURRCIR), which is controlled by the treasury.

However, due to endogenous nature of broader money supply its not really possible to track where every single dollar comes from, but I believe the above, likely explains great portion of recent increase.

> **Comments:**
> **username_0**: These two charts only show an increase of about 30 and 24 billion USD while M2 has increased by over 400 billion USD since February 2024.  
> **username_1**: @username_0 yes but as explained in my answer there is no way to get 1:1 correspondence. For example, when loan is created that increases money supply but as the money is spent and deposited that again increases money supply. Similarly, that increase in currency endogenously increase also demand for lending from non-banking institutions that does not show on that statistics. Furthermore, I do not have data for all types of lending by banks, I showed data for consumer lending, and just assumed other lending will follow same pattern (which is not crazy unreasonable assumption). In case you look  
> **username_1**: for answer that will explain every single dollar, I am afraid that is literally impossible. There isnt some simple accounting correspondence between these aggregates.  
> **username_2**: “Loans and leases in bank credit” on the Fed H8 report table 3 has increased by about 150bn since Feb 2024.  

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