During the COVID-19 pandemic, the U.S. government created roughly $9 trillion in new money and spending power through two parallel channels: the Federal Reserve added about $4.6 trillion to its balance sheet by buying Treasury bonds and mortgage-backed securities, and Congress authorized approximately $4.6 trillion in relief spending financed largely by borrowing. The broadest common measure of the money supply, M2, grew by around $7 trillion between January 2020 and February 2022. Almost none of this was literal printing. The dollars were created digitally, as entries in bank reserve accounts and deposits, not as paper bills coming off a press.
Physical Currency Barely Changed
The Bureau of Engraving and Printing produced about 5.7 billion notes worth $173.7 billion in 2019. In 2020 that rose modestly to 6.4 billion notes worth $216.1 billion, and in 2021 to 6.8 billion notes worth $319.7 billion. By 2022, note production had settled back to 6.0 billion notes.1Federal Reserve. Print Order Information The higher face value in 2020 and 2021 reflected stronger demand for $100 bills, often from international holders and cash hoarding during uncertainty, rather than any radical departure from normal operations. When people ask how much money was printed during COVID, the meaningful answer lies elsewhere.
The Federal Reserve Added $4.6 Trillion to Its Balance Sheet
Before the pandemic, the Fed held about $4 trillion in assets. By early 2022, that figure had roughly doubled to $8.9 trillion.2Richmond Fed. The Fed’s Balance Sheet The Fed purchased approximately $4.6 trillion in Treasury securities and mortgage-backed securities between March 2020 and March 2022.3Mercatus Center. The Federal Reserve’s Balance Sheet Costs Taxpayers
The speed was extraordinary. In the first two months after the pandemic struck in spring 2020, the Fed’s securities holdings rose by roughly $2 trillion.4Congressional Research Service. The Federal Reserve’s Response to COVID-19 Starting in June 2020, the Fed settled into a steady pace of $80 billion per month in Treasury purchases and $40 billion in mortgage-backed securities, for a combined $120 billion each month.5Brookings Institution. Fed Response to COVID-19 Those purchases continued at that rate until November 2021, when tapering began. Net purchases ended in March 2022.
The mechanism did not involve pallets of cash. The Fed electronically credited the reserve accounts of financial institutions in exchange for their bonds. Those new reserves expanded the monetary base, and as banks lent against them, the effect rippled outward into the broader money supply.
M2 Grew by About $7 Trillion
M2, the broadest commonly tracked measure of the money supply, captures cash in circulation plus checking accounts, savings accounts, money market funds, and other liquid deposits. It rose from approximately $15 trillion in January 2020 to $22 trillion by February 2022.6MDPI. Economies – Money Supply Growth That growth was without historical precedent. M2 increased by 19% from 2019 to 2020 and by another 16% the following year.7USAFacts. What Is the Money Supply The year-over-year growth rate peaked at 26.9% in February 2021.8St. Louis Fed. The Rise and Fall of M2
This surge reflected the combined effect of Fed asset purchases flooding the banking system with reserves, stimulus checks and enhanced unemployment benefits landing in household accounts, and the Paycheck Protection Program funneling hundreds of billions to businesses.
One common source of confusion is M1, a narrower measure that appeared to jump from around $4.8 trillion to over $16 trillion in May 2020. That jump was mostly an accounting change, not new money. In April 2020, the Fed eliminated Regulation D, a longstanding rule that limited monthly withdrawals from savings accounts. Because savings accounts could now be used freely for transactions, the Fed reclassified them from M2 into M1.9FRED Blog. What’s Behind the Recent Surge in the M1 Money Supply10Federal Reserve. An Update to Measuring the U.S. Monetary Aggregates The St. Louis Fed described the M1 surge as coming “mainly from money moving out of the non-M1 components of M2 into M1.” M2 growth remained relatively stable through the transition, confirming a reshuffling rather than an expansion.
Congress Authorized $4.6 Trillion in Relief Spending
Alongside the Fed’s monetary actions, Congress passed six COVID-19 relief laws in 2020 and 2021 that together authorized approximately $4.6 trillion.11U.S. Government Accountability Office. COVID-19 Relief Funding By January 2023, about 98% had been obligated and 90% had been spent.12USASpending.gov. COVID-19 Spending
The Committee for a Responsible Federal Budget estimated the net ten-year deficit impact of the major relief laws at approximately $3.4 trillion, broken down roughly as follows:13Committee for a Responsible Federal Budget. Breaking Down $3.4 Trillion in COVID Relief
- Small business grants and loans, including PPP: $935 billion
- Expanded unemployment benefits: $590 billion
- Stimulus checks (recovery rebates): $460 billion
- Health care and provider spending: $420 billion
- State and local government aid: $360 billion
- Tax relief: $330 billion
- Other spending: $325 billion
This spending was financed primarily through federal borrowing, not taxation. The primary federal deficit as a share of GDP jumped from 2.9% in 2019 to 13.1% in 2020 and 10.6% in 2021. Debt held by the public rose from 79% to 97% of GDP over the same period.14St. Louis Fed. Fiscal Origin of COVID-19 Price Surge
Emergency Lending Facilities: Big Capacity, Small Usage
In spring 2020, the Fed created a network of emergency lending facilities under Section 13(3) of the Federal Reserve Act. In April 2020, it announced these facilities would provide up to $2.3 trillion in total lending capacity.15Federal Reserve. Federal Reserve Takes Additional Actions to Provide Up to $2.3 Trillion in Loans Capacity included up to $600 billion through the Main Street Lending Program for mid-sized businesses, up to $850 billion across corporate credit facilities, up to $500 billion through the Municipal Liquidity Facility, and a separate facility that gave banks liquidity by accepting PPP loans as collateral.
Actual usage was far smaller than authorized capacity. As of January 2021, total outstanding loans across all Fed liquidity programs stood at just $94.8 billion, with $49.8 billion in the PPP Liquidity Facility and $16.5 billion in the Main Street programs.16Yale School of Management. Use of Federal Reserve Programs The facilities functioned mostly as backstops: their existence reassured markets, which reduced the need for businesses and governments to actually borrow. By September 2023, only about $12 billion in combined assets and loans remained outstanding across the CARES Act facilities, with the Main Street program accounting for $8.6 billion of that.17U.S. Government Accountability Office. Federal Reserve Emergency Lending Facilities
The Inflation That Followed
Overall U.S. prices have risen approximately 25% since January 2020.18CNBC. Cumulative Inflation Since 2020 The year-over-year inflation rate peaked at 9.1% in mid-2022, the highest reading in four decades, before gradually declining to around 2.7% by late 2025.19Bureau of Labor Statistics. Consumer Price Index The annual average CPI index rose from 258.81 in 2020 to 270.97 in 2021 and 292.66 in 2022.20Bureau of Labor Statistics. Purchasing Power of the Consumer Dollar
Whether the money creation and fiscal spending caused this inflation remains contested. The St. Louis Fed noted that headline PCE inflation peaked about 18 months after M2 growth peaked, a lag consistent with rapid money supply expansion feeding into prices.8St. Louis Fed. The Rise and Fall of M2 Economists at the St. Louis Fed have argued that the massive fiscal deficits of 2020-2021, financed by debt that was effectively monetized, were the primary driver. M2 peaked at 26% above its pre-pandemic trend in December 2021.14St. Louis Fed. Fiscal Origin of COVID-19 Price Surge
Others emphasize supply-side factors. Ben Bernanke and Olivier Blanchard argued in a 2023 Brookings paper that most of the 2021-2022 inflation surge was driven by global commodity price increases and sectoral supply chain disruptions rather than labor market overheating from fiscal stimulus. In their account, fiscal policy contributed mainly by boosting demand for goods that were already in short supply.21Brookings Institution. What Caused the U.S. Pandemic-Era Inflation22Federal Reserve. Fiscal Policy and Excess Inflation During COVID-19 – A Cross-Country View23Federal Reserve. FEDS Working Paper on Inflation
What Has Been Unwound
The Federal Reserve began reversing its balance sheet expansion in June 2022 through quantitative tightening, allowing maturing securities to roll off without reinvestment rather than actively selling them. By September 2025, the Fed had reduced its securities holdings by more than $2.2 trillion from the peak.24Federal Reserve. Balance Sheet Developments The FOMC announced on October 29, 2025 that it would conclude runoff, which officially ended on December 1, 2025.25Federal Reserve. The Central Bank Balance Sheet Trilemma
As of March 2026, the Fed’s total assets stand at approximately $6.66 trillion, well below the roughly $9 trillion peak but still substantially above the $4 trillion pre-pandemic level.26Federal Reserve (FRED). Assets: Total Assets Roughly $2.3 trillion of the $4.6 trillion COVID-era expansion has been unwound. The rest appears likely to stay on the balance sheet.
M2 dipped from its early 2022 peak in what the St. Louis Fed described as an unprecedented year-over-year decline, the first since at least 1959.8St. Louis Fed. The Rise and Fall of M2 That contraction proved temporary. As of February 2026, M2 stood at $22.67 trillion, back near its 2022 highs and trending upward.27Federal Reserve. H.6 Money Stock Measures In aggregate terms, the COVID-era money creation has not been reversed. The dollars created during the pandemic remain in the financial system, and prices sit about 10% above where they would have been if the pre-pandemic trend had continued.14St. Louis Fed. Fiscal Origin of COVID-19 Price Surge