In 2008, the US Dollar increased in value despite the Financial crisis. From August of 2008 to November 2008 the EURUSD moved from a high of $1.56 ( 1 US dollar = 1.54 Euro) to a low of $1.23 ( 1 US dollar = 1.23 Euro). In Forex terms or in pips ( fractional cents) this 3 month move was over 3300 pips. Why would this happen?

The demand for dollars became extremely high and since there’s a limited amount of real currency ( not digital) the value had no choice to go but up. For example, if everyone went to their bank today and withdrew all their life saving, liquidated all their assets and only held cash ( physical) there would be a run on the banks. So far the only run on the banks were during the time of the Great Depression. Everyone rushed the banks to withdrawal all their money and sure enough the banks did not have enough to go around.

Even to this day there is not enough printed currency to account for all the deposits. The surge of demand would force the value up temporarily ( A massive Spike, similar to what we saw right after the 3-4 month surge of USD strength in the end of 2008. See Chart Above). And, slowly come to a balance of fair value ( depreciate). Therefore, to prevent a Great Depression and another run on the banks printing money MUST skyrocket and meet the demand for the people that would like to hold their life saving in CASH. Injecting or increasing the Money Supply isn’t the same thing. This aids the banks and keeps the financial system lending, but it doesn’t fix or solve the problem. Actual printing of money helps because it prevents the panic and keeps the banks operational.

Black Monday Oct 19, 1987

In 1987, there was 117% increase in Printed money compared to 1980 and a 30%+ increase compared to 1985.

1991 Japan Banking Crisis

In 1991, there was a 400% increase in Printed money compared to the previous year – ( The Financial crisis in 2008 , almost identical to Japan’s financial bubble).

1994 Mexico Peso Crisis

In 1994, almost a 95% increase in printed money compared to the previous year – ( First, Debt tripled in 4 years. (1989 – 1994) From $6 Billion to more than $20 Billion. Assassination of Luis Donaldo Colosio on March 23 led to thoughts of political instability igniting a financial crisis. Government devalued the Peso by 50% after losing $11 Billion in reserves in an attempt to intervene the depreciation(May 1994). Short Term Interest Rates increased forcing a devaluation and the government wasted $11 Billion trying to Sell Short their own currency ( buying other currencies) to inflate their own currency to stabilize exports ( economy). Bad Trading I guess).

In some cases, an external economic shock causes a
country’s exchange rate to become overvalue – FRbAtlanta

Bulgarian Financial Crisis 1996

In 1996, there was a 150% increase in printed money compared to the previous year – ( One of the most severe banking ( $9 bil in foreign debt) and currency crises in Eastern Europe, until now).
You should read up on the Bulgarian Financial Crisis. You’d find yourself saying ” Oh ^*&#, it’s happening again”.

ASEAN Financial Crisis

Printed money declined 50% from the previous year ( maybe there was a shortage of ink from the last year’s increase.) In 1997, there was also a financial crisis in Southern Asia from too much Hot Money (investments finally slowed as there were concerns of sustained growth) and massive GDP growth (9-11% annually) that finally came to a halt. The Thai baht reached its lowest point of 56 baht to 1 US dollar in January 1998. The Thai stock market dropped 75% in 1997. Indonesia , South Korea, and Thailand were affected the greatest. On October 27, 1997 The DOW dropped 554 points in a single day. Oil reached $8 a barrel triggering a financial crisis in Russia which had a negative affect on Long term capital management in the US forcing a Federal bailout of $3.65 billion to avoid a wider financial collapse.

Argentina and Brazil Economic Crisis 1999

In 1999, more than 100% increase in printed money compared to the previous year – ( Argentinean currency pegged to US dollar in 1991 after hyper inflation peaked a few years earlier. Continued Government Spending amounted massive debt. 50% greater than GDP). You should also read up on this to fully understand the influence that the IMF can have on government spending habits.

2000-2002 Dot Com Bubble

In 2002, there was a 300% increase in printed money compared to the previous year and a 450% increase compared to 2001.

Printed Money since 2006

2006 – 950 million $100 bills
2007 – 1.08 Billion $100 bills
2008 – 1.2 Billion $100 bills
2009 – 1.78 Billion $100 bills
2010 – 1.9 Billion $100 bills ( a new record high)
Source – MoneyFactory.gov

I would like a more up to date analysis of the real money supply in relation to a financial crisis, but when the Federal reserves fails to publish these figures (M3) all I can find is an inclined graph of the USD money supply.

On March 23, 2006, the Board of Governors of the Federal Reserve System will cease publication of the M3 monetary aggregate.