The Unusual Story of Money Since 2020.

The world came to an abrupt halt in 2020 with the outbreak of COVID-19.

Overnight, streets emptied, factories shut, and economies froze. Echoes of the Great Depression resurfaced, marked by mass unemployment, food insecurity, bankruptcies, and even rising social unrest.

A century ago, such conditions helped fuel the rise of fascism in Europe. Policymakers knew they could not let history repeat.

The Great Flood of Money

Central banks responded with unprecedented force, injecting nearly $10 trillion globally — half of it from the United States alone.

The U.S. stimulus of $5 trillion, equivalent to a quarter of its GDP, was the largest peacetime liquidity injection in history.

Where did the money come from?

1. Governments took on debt exceeding 100% of GDP.
2. Central banks bought financial assets directly in the open market.
3. Interest rates were slashed to near-zero, keeping cash sloshing through the system.

Where did the money go?

Individuals: U.S. households piled up $3.4 trillion in excess deposits, the largest peacetime accumulation of liquid wealth ever recorded (Federal Reserve).

Corporations: Balance sheets swelled. Median cash-to-assets ratios leapt from ~12% post-GFC (Great Financial Crisis) to over 30% in 2021. (Federal Reserve)

The Second-Order Effects. Money rarely sits still. It reshuffles.

1. Inflation: Too much cash chasing too few goods unleashed the sharpest price surge in four decades.

2. Interest Rates: Central banks increased interest rates aggressively.

3. Cash Transfer: Inflation and higher borrowing costs quietly siphoned wealth from households back into the balance sheets of corporations and financial institutions.

The result?

The S&P 500’s market cap doubled between December 2019 and July 2025, from $26 trillion to $52 trillion.

What Next?
History does not repeat itself, but it often rhymes. Debt defaults and liquidity squeezes usually mark the final act of an economic cycle. That chapter has not yet been written.

When?

I’m smart enough to know I’m dumb at predictions. I have no idea.

“There are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know.” - J.K. Galbraith.
Take it easy until next time.

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