Were a large fraction of US Dollars in existence printed since 2020?

Question

For many months now I have heard claims on the internet and radio that some large fraction of USD "in existence" were printed since 2020. The percentage ranges between 40 and 80%.

• Is it a big deal that 40% of USD was printed in the last 12 months? NO, it’s not.
• 80% of all dollars in existence were created in the last two years.
• If 35-80% of US dollars were printed in 2020, why is inflation ‘only’ at 6.8%?
• Since January 2020 the US has printed nearly 80% of all US dollars in existence. $4.0192 Trillion at the start of 2020, October 2021 $20.0831 Trillion

These were found with a quick Google search. Other claims are not linkable as they were in my news feed or radio waves.

Some claims cite the US Federal Reserve "M1" Statistic, which indeed shows a roughly 5-fold increase in value between early 2020 and now. There is a footnote below the graph that explains a change in the definition of M1:

Before May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other checkable deposits (OCDs), consisting of negotiable order of withdrawal, or NOW, and automatic transfer service, or ATS, accounts at depository institutions, share draft accounts at credit unions, and demand deposits at thrift institutions.

Beginning May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other liquid deposits, consisting of OCDs and savings deposits (including money market deposit accounts). Seasonally adjusted M1 is constructed by summing currency, demand deposits, and OCDs (before May 2020) or other liquid deposits (beginning May 2020), each seasonally adjusted separately.

Additionally there is a blog post from the FRED about the change. Being a person who is not knowledgeable about economics, I doubt my readings of these terminology-heavy documents.

Are these "40-80% printed recently" statements truthful?

• If the claims are false or misleading, in what way?
  • Assuming they are referring to M1, are they defining it incorrectly? Is M1 not the amount of USD "in existence"?
  • Are they using "existence" or "dollars" in an obscure/imprecise way?
• Are these changes normal and not cause for concern?

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"Printed" is being interpreted in a few ways. Let me explain my motivation behind asking this question, so we can reach consensus on the best definition of "printed":

1. I want to begin to understand the effect of such a change being claimed, if one occurred/is occurring.
2. Knowing the effect, whether or not it occurred, would give insight into the motivations of those making the linked claims.

Answering those questions is outside the scope of this question. If one shared such motivations, what is the best definition of "printed"? To me, I suggest making no distinction between digital and physical USD. M1 and M0 appear to include physical and digital money, for example.

Answer 1

The sensationalist claims you are seeing are from people who are either ignorant of economics (even at a fairly basic level) or are deliberately trying to mislead you.

Let's consider some of the wide variety of vague claims being made.

Were 40%-80% of actual physical US currency bills printed in 2020?

No they were not. The first article in the question links to the Federal Reserve site which tells us that the printing of banknotes in 2020 amounted to 5,168M notes with a value of $146,374M. Approximately $1.8T currency was in circulation in January 2020 (a value which didn't change much during the year) so it printed about 8% of the currency. An approximately equal amount of currency was destroyed.

Did the money supply increase by 40-80% in 2020?

The money supply is a measure of the amount of US$ circulating and available - not just physical cash but amounts held in bank accounts, investments, etc. The most usual measure of money supply is something called M1, which you can look up. That is the chart you are looking at, which shows a steep upward rise in 2020. A deliberate increase in the money supply is sometimes called "printing money", although no physical money is usually involved.

The reason for the sharp upturn in M1 in 2020 is that the measure was redefined in May 2020. Several kinds of deposit that weren't included before are included now. That explains the sharp increase. It's as though your local government required you to list your house square footage excluding basement, and then decided to change to including the basement. Because your house's measured square footage goes from 2000ft² to 3000ft² doesn't mean your house got bigger - it just means your 1000ft² basement wasn't included before and now it is. It's the same with M1 - some money wasn't included before and now it is.

The Medium article is very good about the non-effects of this non-change, and explains how even if there were some changes the effects would be small.

Answer 2

Did the money supply increase by 40-80% in 2020?

Yes.

It didn't increase by 425%, as you might think by looking at the M1 data (as DJClayworth points out in their answer, the jump there is due to a change in the definition of M1), but if you look at Monetary Base, which measures the supply of liquid money (circulating currency and bank reserves, which is a subset of M1: a smaller subset since 2020 than it used to be), and which didn't undergo such a redefinition, it increased by 52%, from 3.442 trillion in January 2020, to 5.248 trillion in January 2021. This is due directly to money creation during that year.