Suppose the world has two goods to buy and $100 to spend. The average price of the goods will be $50. Now suppose that, all else equal, there is $200 to spend. The average price of the goods will be $100. In other words, when a government prints money, there's more money chasing the same amount of resources and inflation will be the result. That's why this graph is so worrisome.
That spike in the end left me speechless when I saw it. It tells me we are headed for a really bad inflationary scenario. The graph comes via Doc who has thoughts on this problem.
Update: The Big Picture has more graphs that show this spike (the post is from late October).
Update: and as for the definition of "monetary base"
The total amount of a currency that is either circulated in the hands
of the public or in the commercial bank deposits held in the central
bank's reserves. This measure of the money supply typically only
includes the most liquid currencies.
Also known as the "money base".
Investopedia Says:
For example, suppose country Z has 600
million currency units circulating in the public and its central bank
has 10 billion currency units in reserve as part of deposits from many
commercial banks. In this case, the monetary base for country Z is 10.6
billion currency units.
For many countries, the government can
maintain a measure of control over the monetary base by buying and
selling government bonds in the open market.
Update: Here's M2
Here's the last 5 years.
Here's the percent change in M2.
The spike in the money supply is not as pronounced when we only look at M2, but there's still a spike. The big spike was recorded in the data on Sept 22, 2008.
All the charts in this update come from the Fed II Database.