M2 suggests that rather than right now being a new second problem, the first one from 2008 is still ongoing.
You're looking at M0-esque BASE money supply. Note that BASE doubles in late 2008, plateaus and rose again modestly (25%) this year. M2 has been more subtle, never raising more than 11% annually with a minima at 2% in 2010, but right back at 10% M2 annual growth today.
to get to your question. i think M2 is ramping b/c everyone is cashing out of money mkt funds as they are forced to liquidate bonds from the debt downgrade and move USD's into regular bank accts. this is why you're seeing Bank of NY Mellon charging for holding deposits. because they can. so its misleading to say the Fed is pumping new money into the markets.
if you read my earlier posts in this thread, yes the USD can skyrocket from here if enough debt liquidation is forced thru defaults or margin calls raising the demand for cash to pay off these bad debts. you can look at this 2 ways; an overall decrease in the number of virtual plus real USD's floating around or as a scramble to grab the real USD's to pay off the bad virtual USD debts. either way the USD rises.
the $DXY is at the bottom of its consolidation channel. from here we should get a huge ramp. talk about a panic from that happening...
if you read my earlier posts in this thread, yes the USD can skyrocket from here if enough debt liquidation is forced thru defaults or margin calls raising the demand for cash to pay off these bad debts. you can look at this 2 ways; an overall decrease in the number of virtual plus real USD's floating around or as a scramble to grab the real USD's to pay off the bad virtual USD debts. either way the USD rises.
the $DXY is at the bottom of its consolidation channel. from here we should get a huge ramp. talk about a panic from that happening...
This is interesting and worth a re-read. My buddy at HSBC made a similar point that went over my head. So if I understand you, BASE, M2 growth hasn't been a result of QE* but was rather the symptom of deleveraging that made QE* 'necessary'.