#250: Q1 Monetary Base Update, inflation, and haters with Matthew Mežinskis
5/13/2021 · 134 min · transcript via mlx
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Key topics
— Matthew Mežinskis released Q1 2021 global monetary base update, tracking 30 floating currencies and comparing Bitcoin to base money rather than broader money supply or gold.
— Critics including Francis Coppola and Joe Eisenthal misunderstand how central bank balance sheets work, conflating treasuries (assets) with reserves (liabilities) and rejecting Japan's inclusion without substantive argument.
— The U.S. monetary base grew 12.1% annually from 2000–2021 while GDP grew only 3.7%, meaning one dollar of base money produced $17 of GDP in 2000 versus $3.61 in 2021—a stark productivity decline.
— The Federal Reserve abolished reserve ratios in March 2020 to accommodate massive stimulus and treasury deposits, enabling unlimited money creation without traditional banking constraints.
— Inflation metrics (CPI, PPI) are unreliable because individual consumption baskets differ; multiples like base money per GDP or per unemployment point are more tangible measures of monetary expansion.
— Free banking advocates argue central banks cannot rationally set reserve ratios; competitive markets should determine money supply and banking structure.
Market & price signals
— Bitcoin is now the 6th largest base money in the world (ex-gold). The global monetary base has expanded dramatically, especially post-March 2020; Canada's base money growth annualized at 280% in the past year after historically stable 7% growth. U.S. debt is 27 trillion, doubling every nine years at 8.3% compounded annual growth. Gold, stocks with dividends (S&P 7.7% annualized), and government bonds (4.7%) all underperformed base money growth over two decades.
Actionable insights
— Ignore official inflation indices and instead track base money growth against GDP, unemployment, or asset prices to understand real monetary debasement.
— Monitor central bank balance sheets directly (treasuries held, reserves issued, treasury operating accounts) rather than interest rate guidance, which obscures the true rate of money supply expansion.
Episode sponsorships
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