The US Shrinking Money Supply!

42 comments

• Tetradon

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  a year ago

  Man, Mate, normally you seem like a cool dude, but any talk of inflation turns you into SJG.
• docsavage

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  a year ago

  The shrinking money supply could be pushing us into a recession, but that recession hasn't kicked in yet. Unemployment levels aren't going up. More otc offerings may be coming more from the increased prices from the inflation we've had over the last couple years. Income adjusted for inflation has dropped for 20 months in a row. People are poorer. A record number of people are working a second job to make ends meet. For strippers, the second job may be otc in addition to their normal stripping job.
• shailynn

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  a year ago

  ^ this… I’m in sales, I sell products that everyone wanted during the pandemic. Had huge increases in sales during that time period. I figured the party would be over in 2022. I was wrong. Way wrong. Sales were higher in 2022 than any other year during the pandemic. Then came 2023. Sales are off 15% in some categories when compared to same time as last year. Party is over. People are broke, especially upper middle class people who the majority of my products are targeted to. They got slammed the hardest because most of their wages didn’t increase the last few years like lowered tiered workers did. Plus their vacations, fancy cars, dining out all became more expensive which in turn thinned out their money. I know a pharmacist who just went with a new company making more than he did at his last job. Pharmacists make good money. Even his wife is working a second job so they can keep up with their lifestyle.
• Mate27

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  a year ago

  Tetradon, you’re not far off on that because I am totally ocd when it comes to planning my finances and personal health. Combine that with resistance from the curmudgeon crew and this becomes full on entertainment for me, because I know my stance is correct. I see Docsavage has drawn much levity to this scenario, and is mostly spot on. Jobs are being added, but they’re the lower paying service jobs lost during the pandemic making a comeback, whereas the white collar tech and finance sector is shedding jobs. It takes 3-4 service sector job be to equate one lost tech/finance position. The jobs reports do not separate those figures, and aren’t reflecting the true economy. Anyhoo, glad to see you guys are in tune with reality. There’s hope for humanity after all!
• Mate27

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  a year ago

  [view link] Something else to study while looking at these charts! Rotflmfao!!
• gammanu95

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  a year ago

  WTF is wrong with you?
• gammanu95

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  a year ago

  Actually, inflation continues to grow and shrinkflation continues to shrink things. [view link] [view link]
• mark94

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  a year ago

  From Yahoo Finance The Personal Consumption Expenditures (PCE) price index — the Fed's preferred assessment of how quickly prices are rising across the economy — rose 0.6% in January and 5.4% from last year. On a "core" basis, which strips out volatile food and energy components, prices rose 0.6% for the month and 4.7% from last year. The numbers support recent indications inflation is not falling at the pace and extent investors have been hoping for
• Cashman1234

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  a year ago

  It’s odd that the money supply - even M2 - would decline so much in December. I would expect velocity to add to a decent increase (at least from Oct-22 to Dec-22). If the Fed sees that type of dip, and it is sustained, they might rework their models, and rethink their planned rate increases.
• Mate27

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  a year ago

  I gotta ask again, even if rhetorically, did we all become renters this past year? If so then you’d have felt the full brunt of the PCE (or cpi), because shelter makes up such a large component of those indices, even more so for the cpe. Again, with the lag of commercial and residential leases turning over from 12-18 months, we have yet to see that variable make its weight known on the averages. It’s coming!!
• Mate27

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  a year ago

  Home values take their biggest plunge since 2008 from June-Dec 2022! Of course are these values reflected yet in the pce or cpi indices being reported? Answer: Hell no, but they’re coming! It’s not me saying this, it’s others. You’re welcome. [view link]
• Mate27

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  a year ago

  [view link] Again, it’s not me saying this, it’s Reuters. Of Course if you’re part of the curmudgeon crew you’ll say otherwise. The fed is ready to toy with creating a deeper recession than necessary by continuing with their rate hikes. They will have to drop rates as soon as they’re done raising them, and then tuscl can tell them “we told you so!”
• Mate27

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  a year ago

  [view link] This is Barron’s report not mine! Some points considered… -money supply continues to fall -money supply is still 30% above pre-pandemic -likely too much liquidity money supply in system -historical drop in supply and effects are unknown, but will be a pervasive factor in inflation and goods and services pricing (or repricing) Bottom line, I was rong and I was right. Inflation is dropping like a rock, and it’s taking its time showing up in the # reported by the fed. Difficult times are ahead for personal households, and those who have assets to spend will reap the rewards if intended on spending it with your favorite dancer. Invest in treasury bills, you won’t go rong unless the government decides to shut down on us come June/July.
• mark94

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  a year ago

  With inflation currently at 7%, your “ dropping like a rock” prediction has failed. So, you seem to be focusing on money supply as a proxy for inflation ( it isn’t ). But, yes, sometime in our lifetime inflation will go down and you can proclaim your genius.
• Mate27

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  a year ago

  Mark, congrats on warming up your arm in time for spring training throwing from the peanut gallery. Since my claim in august, the inflation rate is definitely not 7%. Your 7% is accurate from January ‘22 to January ‘23. My genius is calling it over at its peak of summer 2022, and yiu can claim I was rong when summer of ‘23 comes around. In fact, we only have to wait until April, when the treasury department will declare their new rate of return on i bonds. That will be the most accurate report from the October ‘22 through April ‘23 cpi #s. That will be the earliest you can tell me to go pound sand, but with each and every month of inflation #s being reported on a monthly basis, it looks like the rate will fall to around 3% max. Inflation still? Yes, but as I recall accurately my prediction was that inflation is dropping like a rock, from 9.62% as reported in April of ‘22 to what we will see on another month. Then I will restate “I told you so!”
• mark94

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  a year ago

  The most recent monthly PPE is .6%, which is 7.4% on an annual basis. There is rumbling that the Fed will need to raise its target, terminal rate to 6% or even 7% to finally bring down inflation.
• Mate27

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  a year ago

  October, November, and December ppe #s came in well below the latest 0.6% reading yiu quote fro January. In fact November and December declined or was at 0.1%. Lump that together with the cumulative aspect and you will see reports coming in much lower, and this isn’t even reporting the lagging shelter costs that take 12-18 months to enter the equation. Alas, the future is bright on the inflation front, becaise real time data shows significant drops in the rate since, yiu heard it from me 1st, the summer of ‘22!!
• Papi_Chulo

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  a year ago

  Inflation should go down "numerically" on a year-over-year basis when it starts being compared to the high-levels of 2022 - e.g. a year-over-year of let's say 3% in April of 2023 would be a "decrease" compared to the 9 6% of April 22 but that would be 3% on top of that 9.6% meaning prices are still even higher - we would need *deflation* for prices to come down from their current-elevated-levels and not merely less inflation - that year-over-year argument can also be nade to higher 2024 #s when compared to likely lower 2023 #s that in turn are compared to 2022 #s
• Papi_Chulo

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  a year ago

  The current administration has also passed some large-ass bills whose effect in the money-supply has not fully been felt yet
• mark94

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  a year ago

  Not to mention, a trillion dollars of loan forgiveness, and a bottomless commitment to Ukraine. All, without even advising Congress.
• Cashman1234

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  a year ago

  There are too many holes in these different reports being strung together. It doesn’t make sense that the money supply fell from Oct-Dec 2022. The velocity of money increases during the holidays, and that makes the theory questionable. In order for the Fed to think the rate increases are slowing the economy, they will need to factor out so much of the PPI, it would almost appear to be cherry picking. The effects of the last congress’ spending - and the current President’s policies - won’t be fully felt for years. That doesn’t mean the Fed won’t act presumptively, and push more increases. Powell had said he won’t take away the punch bowl when the party gets going. I will wait and see if he alters course with planned increases. The markets have largely factored the increases in for 2023.
• mark94

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  a year ago

  From the Kobeissi Letter: The U.S. Now Has: 1. Record $16.5 trillion in household debt 2. Record $11.9 trillion in mortgages 3. Record $1.6 trillion in auto loans 4. Record $986 billion in credit card debt Total mortgage debt is now more than double the 2006 peak. Meanwhile, 36% of Americans have more credit card debt than savings with balances rising at the fastest pace since 1999. This is all while mortgage rates just hit 7.1% and credit card debt rates hit a record 24.9%. We are "fighting" inflation with debt.
• mark94

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  a year ago

  From the Kobeissi Letter SUMMARY OF POWELL TESTIMONY (3/7/23): 1. Peak rate will be "higher than anticipated" 2. Revisions show inflation "higher than expected" 3. Minimal deflation in services 4. Decisions to be made "by meeting" 5. Inflation "to be bumpy"
• mark94

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  a year ago

  Two Year Treasury Yield explodes higher, reacting to Powell's Fed testimony. Highest Interest Rate at the short-end since 2007.
• mark94

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  a year ago

  From the [view link] Western governments, including the U.S. through Joe Biden, have limited and curtailed the production and exploitation of Oil, Coal and Natural Gas. At the core of the inflation within those same governments, this is the issue at hand. Energy prices have skyrocketed, driving the cost of everything through the roof. The central banks are raising interest rates in an attempt to shrink the economy to match the drop in energy production. This is their monetary policy (interest rates) attempting to support economic policy (Green New Deal / Build Back Better). There are no lines for consumers in the U.S and Europe of people buying durable goods, electronics or shopping for non-essential items. Prices on the products within the durable goods economy are not being driven by excess consumer demand. There are not 25% more people buying lemons and milk than this time last year. The prices for goods in general, and for essential goods specifically, have risen as an outcome of the input costs around energy skyrocketing.
• Mate27

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  a year ago

  [view link] I found a clip from one of a Jerome Powell’s fed meetings. It is a 5 second clip and pretty much sums it up.
• mark94

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  a year ago

  You posted a 5 second clip from Talledega Nights that requires registration to listen. No thanks.
• rickdugan

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  a year ago

  Powell is now saying that they may need to resume faster hikes and move the interest rate above the previous target. This is no doubt in response not only to recently published January numbers, but whatever more recent data the Fed is analyzing that the broader markets do not yet have access to. What a shock. The U.S. is still running on stimulus-heavy fiscal policies, which are working against the Fed's already weak ass efforts, and the employment market is still as tight as a drum. There is no doubt in my mind that the cowardly lions at the Fed are trying to hold out until the next election before bringing any serious pain. If they really wanted to kill inflation, they'd get serious about these interest rate hikes and start unwinding its balance sheet instead of this tip toe nonsense. But instead they are going to continue to fuck the working class for political reasons. White collar workers are much more likely to be able to keep pace with salary increases and job moves. White collar workers also spend less as a % of their income on household essentials, like energy and food. This distortion in the economically impacted is likely why we're seeing goods sectors slow down, while spending on services, which are typically utilized by upper-income households, continues to go up. What a sad state of affairs.
• mark94

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  a year ago

  At this point, monetary policy has relatively little impact on inflation. It’s our fucked up fiscal policy ( trying to spend our way out of all problems ) that needs to change before we defeat inflation. Plus, bringing the supply chain back to North America and killing the green energy fiasco wouldn’t hurt.
• Mate27

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  a year ago

  [view link] I see from this chart the money supply increased in January, likely a monetary dip. Mark, if you click on the little red arrow on my comical link from Talledega Nights, it plays the sound bite w/out registration. Glad to assist with your reading comprehension!
• Mate27

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  a year ago

  ^ momentary blip, not monetary dip
• Cashman1234

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  a year ago

  I think Rick and mark basically are providing a similar answer. It is true, as monetary policy can only go so far, when Congress and the White House are spending money at record levels. I still can’t believe the money supply declined over the holidays. Unless those are heavily inflation adjusted money supply numbers. If Powell is going to try and counter all of the bone headed spending of Washington, the interest rates will need to move up at a pace never before seen.
• mark94

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  a year ago

  Biden proposes $6.8 trillion budget for FY 2024, trillion more than last year McCarthy: $10.5T of interest costs on debt over 10 years 'one of the greatest threats' to U.S. Inflation is not going away with these clowns in the Whitehouse
• mark94

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  a year ago

  In the wake of the collapse of Silicon Valley Bank, the stock index for regional banks dropped 8 % yesterday and 4% so far today. That’s unprecedented. Treasury Secretary Yellen has just announced she is monitoring several banks. This could turn into a full blown banking crisis within days. The problem is most banks have invested heavily in “safe” Treasury Bills which have collapsed in value because of raising interest rates. We are discovering that many banks are under capitalized as a result.
• Mate27

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  a year ago

  Finding it hard to believe crisis used with banking system since they’ve had to increase their capital on deposits from the fallout of 2008 liquidity reforms. Fed stepped in during that time and the fed guarantees any treasury deposits. The treasury bills are short term(less than a year) so their values don’t drop but the risk is time stuck at a lower rate when rates increase on the market. Due to short duration bills are nowhere near as risky as the notes on the long end of 5 or 10 years. Did anyone notice todays report showing wages increasing only a little above 4% yoy in February? Wage spiral inflation is a big nothing burger considering they aren’t even keeping up with inflation. Jobs report shows gains in hospitality/leisure and retail, but continued losses in finance and tech. It takes 3-4 (or more) hospitality/retail jobs to equal one finance/tech position. These jobs reports aren’t spelling out the work tye fed monetary policy has already had an affect on. Fiscal policy lacks velocity on money to drive inflation. Whatever Biden wants to implement won’t be put in action for a loooong time, if ever. Anyone remember Obama telling us about those “shovel ready” jobs that they barely got around to filling out? Same here, fiscal policy only goes so far when all that money just sits around waiting to be spent, therefore velocity takes place. The pandemic stimulus has been winding down for a year, as depicted from the money supply charts. It’s funny how every counterpoint listed has been directed tied to somebody’s political belief/narrative. Politics are really a minor component of this discussion, and if it was a bigger component then you’d better blame Trumps administration for fucking up throwing money blindly out into the system at the early onset of the pandemic. I voted for him twice, and think he is a flash in the pan. Bye bye!
• mark94

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  a year ago

  The regional banks keep a lot of their investments in longer T Bills. These have plunged in value. Like 20%-25%. The capitalization requirement doesn’t reflect this. The assets are only marked to market when sold, which SVB did, revealing the problem. The worry is the same problem exists at all regional banks, but the problem is hidden.
• Mate27

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  a year ago

  So you’re clarifying they’re not invested at t-bills, then the treasury notes is where they are at. Only problem would be if they had to liquidate those funds, and apparently they wouldn’t since they bought them to be held for the duration, not to be held to buy/sell in the open market. Tye deposits banks hold onto for overnight are in a different bucket than needed for longer term investments. I think this issue is conflating it with the longer dated treasury notes you speak of.
• Mate27

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  a year ago

  Todays 6 month t-bill is 4.89%, however the 5 and ten year are at 3.4%, almost a 140 basis point inversion! Well, that tells us that the velocity of money slows and appreciable assets will continue to drop, or deflate. Any commodity since summer of ‘22 has deflated, and so has the money [view link] supply, except for that momentary blip in January of this year. Now banks who took on too much risk on the long end suffering, because of inverted rates. Fed has another job to do other than talking tough like this guy. [view link] What’s even funnier is that we got some tuscl members who mimic John C Reilly from talladega nights! Rotflmfao
• Mate27

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  a year ago

  ^^ doc, we all need to keep in mind the fed bailing out these banks are really just buying up their own bonds at 2% to forgo any 3.5% market rates. This is how the fed Powell talks and so do some pundits. [view link]
• Mate27

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  a year ago

  [view link] Most recent update with chart linked showing 5% drop in M2 supply since summer of ‘22. This leads to a further accentuation of me saying, “I told you so!”
• Mate27

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  a year ago

  [view link] More “I told you so”! CPI has come in at 3.8% and PCE at 4.6% or around that. Stories of woe from the past year and a half on inflation will soon be gone and shifting to other stories of woe; my car won’t start, my atf won’t fuck me anymore, I broke my cock, etc!!
• Mate27

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  a year ago

  [view link] Oh forgot to add this states M2 declined for 6 straight months and down 5% from a year ago. Not quite at the levels pre pandemic, not even close, but going that way.