The connection between money supply and economic growth might seem abstract, but its effects touch every business and household. In an interview on Detrloit’s “The Pulse,” Jeffrey Fratarcangeli explained how increased liquidity drives local economic activity and why current money supply levels signal potential growth.
Money Flowing Through Local Channels
Jeffrey Fratarcangeli highlighted a key economic indicator often overlooked in mainstream discussions: “The amount of money that we have in the system today has hit a two year high as it relates to the amount of liquidity into the system.”
This observation about what economists call “M2 money supply” matters because:
- More money circulating means more potential spending.
- Businesses can access capital more easily.
- Consumers have greater purchasing power.
- Local economies see increased activity.
“The more money that’s out there in corporations being allowed to be essentially utilized for business activity will create more revenue, more opportunity, more ultimate gains and corporate earnings,” Fratarcangeli explained.
His analysis connects these broad monetary concepts directly to local outcomes: “That’s local as well as national.”
How Corporate Tax Policy Affects Money Supply
Jeffrey Fratarcangeli pointed to specific tax provisions that increase the available money supply by allowing businesses to retain more capital:
“If you have the essential ability to take action, spend money on the corporate level and deduct it 100% against that year’s taxes, therefore you can turn around and spend more towards the economy, the local economy,” he noted.
This mechanism works because:
- Companies keep more of their earnings through tax deductions.
- Those retained earnings become available for investment.
- Local investments create jobs and economic activity.
- The cycle reinforces itself as new income generates new spending.
“That will flow down to everyone locally, as well as in that business, as well as exterior to the state of Michigan,” Fratarcangeli explained, showing how tax policy creates ripple effects through regional economies.
Evidence of Liquidity Driving Growth
When asked about current economic indicators, Jeffrey Fratarcangeli connected money supply directly to positive business activity:
“We saw first quarter earnings. We saw capital expenditures continuing to push forward, we’re seeing more spending,” he observed, adding that “we saw second quarter earnings come out. Recently, 80% of companies beat their expectations, both top and bottom line.”
These outcomes suggest that increased liquidity isn’t sitting idle but actively fueling business expansion and stronger-than-expected performance.
Fratarcangeli acknowledged some performance improvements came from adjusted expectations but emphasized the underlying strength: “Now some of that is a direct correlation to guidance changing in the first quarter, but yet we saw that. We overcame that.”
FAQs: Understanding Money Supply and Local Growth
Are there downsides to increased money supply?
Fratarcangeli acknowledges some “concern as it relates to tariffs and how it affects inflation,” hinting at the classic economic tension between growth and inflation that can accompany increased liquidity.
Does money supply affect different regions differently?
Fratarcangeli notes that the automotive industry has “been affected greater than most other industries” by tariffs, suggesting that regional economic specialization influences how monetary conditions impact local areas.
Subscribe to the official Fratarcangeli Wealth Management YouTube channel for weekly updates from Jeffrey.
