That’s a Lot of Money Running Around

During the early stages of the financial crisis, those policy actions did exactly what they do in the textbooks. M2, the broadest measure of the money supply that the Fed still tracks, climbed from $7.36 trillion in October 2007 to $7.88 trillion a year later and to $8.39 trillion last June 22, according to the St. Louis Federal Reserve Bank.

That’s an additional $1 trillion to fund loans and credit card bills and plant expansions and state borrowing and . . . well, just about anything the economy needs.

And because each dollar of that extra trillion gets used over and over by the economy, the effect is even larger than that huge sum itself. What economists call the M2 multiplier has ranged between 8 and 12 for most of the period from 1959 to 2009. So that $1 trillion has the effect of an extra $8 trillion to $12 trillion in money racing around the economy.

Even in the huge $14 trillion-plus U.S. economy, that should be enough to jump-start economic activity and raise justifiable fears of runaway inflation.

In normal times, anyway. But the numbers coming out of the Federal Reserve say these aren’t normal times.