Timothy Sumer

M4—the broadest measure of money supply—rose sharply in 2020, which drove increased concerns about inflation. However, Fisher Investments’ founder and Co-Chief Investment Officer Ken Fisher says it’s not just the quantity of money that matters for inflation but also how fast that money changes hands, otherwise known as money velocity. In 2020, money velocity plummeted, offsetting a lot of the growth in money supply. Therefore, Ken says M4’s 2020 spike may not be as inflationary as everyone fears. Further, Ken argues that M4 may not be the best measurement of money when it comes to inflation, as it includes money-types that aren’t commonly used as a medium of exchange (aka “near money”). Ken says money that is used as a medium of exchange (aka “real money”—coins, bills, checking and savings accounts) didn’t actually increase that much last year, and it’s the velocity of real money that matters most for inflation. Ken notes we don’t have a great measurement of velocity for re...