Measuring Inflation Through Bank Deposits
Inflation is commonly discussed in terms of rising consumer prices, but this approach can obscure the underlying driver: the expansion of money in the economy . Prices reflect inflation, but they are not a precise measure of it. I take a different approach—measuring inflation directly through the growth of money in circulation, specifically commercial bank deposits . Why Bank Deposits I use the Federal Reserve’s Deposits, All Commercial Banks (DPSACBW) series as the core measure. This series tracks the total deposits at U.S. commercial banks, including checking, savings, and time deposits. It represents money that has actually reached households and businesses—money that can be spent, lent, or invested. Unlike price indexes, DPSACBW reflects monetary expansion itself , rather than adjustments for substitution, quality, or other statistical treatments. It aligns with the monetarist definition of inflation: the growth of money supply driving economic activity and prices. https://fred...