In July 2021, the monetary base was $6.130 trillion, which was its highest level ever. Compared with one year ago, July’s monetary base was up 30.4%, which was the second straight month of accelerating month-over-month growth. Also, this was the 20^th consecutive month of growth. It was the 15^th in the last 16 months with growth faster than 20%. Also, it’s staggering to realize that July 2020’s monetary base was 44.2% more than July 2019’s monetary base, and July 2021’s monetary base was 30.4% higher than July 2020’s monetary base. That’s an incredible amount of growth in just two years and is a significant contributor to the accelerating rate of inflation.

The annual rate of growth decelerated to 39.9% in July, which was the fourth consecutive month of decelerating growth. Based on the monthly and quarterly trends in the money supply, it is likely that the annual rate of growth in the money supply will continue to decelerate.

Historically, the annual rate of change in the monetary base leads capital equipment consumption, specifically machine tool orders, by 12-18 months. Although, the lead time between the monetary base and capital equipment consumption shrunk over the last decade. The recent rapidly accelerating growth in the monetary base should eventually lead to rapidly accelerating growth in machine tool orders and capital equipment in general. However, based on the historic correlation, it should be expected that growth in capital equipment orders will peak in the second quarter of 2022.