"We make decisions about whether we save or spend. We make decisions on whether we borrow money or not. And, those all affect the rate of growth of the money supply," the firm's chief investment strategist told CNBC's "Trading Nation" on Monday. "While we're still debating when the Fed may start tapering ... the reality is the money supply in this country has been tapering now for the last four months."
Paulsen, who oversees about $1 billion in assets, highlights the trend in a special chart. It shows the relationship between consumer price inflation and money supply since 1990.
"The real M2 money supply [total amount of dollars held by the public] peaked at the end of February year-on-year at 26% rate of growth," Paulsen said. "As of the end of May, it's down to about 8.5%, and it's probably lower than that when the June numbers come out."