Money is tight when we observe the monetary base (currency in circulation plus reserves). It is dangerous to shrink the monetary base at the pace in which we have done so as interest rates rise. Doing so could be the difference between an economic recession and a depression.
One can see based on the first chart below that the monetary base has declined from a peak of $6.4 trillion in December 2021 to $5.4 trillion in September. September’s $5.4 trillion figure is down 15.3% year-over-year (see the second chart below for the year-over-year percentage change in the monetary base).
This shrinking of the monetary base has undoubtedly slowed the economy and will continue to do so. The Fed needs to be careful to not shrink the monetary base too quickly with its QT program as it raises rates. Shrinking the monetary base also drives rates higher and credit demand lower.