The major money stock measures just showed declines, is this a start of something ominous?

What other money stock measurements are you looking at and what in those charts and M2 should we be looking at for a sign of danger?

Greg

Are the monetary authorities conducting a real-time experiment on the money supply?

Let’s take a quick look at the changes to the money stock and savings measures in the wake of covid. This provides us with a glimpse into what caused this demand-pull inflation as it essentially encouraged the consumer to undervalue their money and chase the fewer goods available. Perhaps it can also provide us with a glimpse into what lies ahead for the markets and economy. Given how the covid stimulus was handed out and what it entailed, I feel that we need to include personal savings measures as well. If these numbers shrink and fall below trend, this could be a catalyst for money stock growth to fade or even decline on an outright basis.

The Fed recalculated M1 in May 2020 to include “liquid deposits,” thus we need to concentrate on M1 subsequent to May 2020

Source: Money Stock Measures – H.6 Release (May 24, 2022), Federal Reserve

The main point of my argument against the covid monetary and fiscal responses rested in the way the funds were dispensed. Let’s take a look at what happened to M1 and M2 money stock measures of the United States Fed in the wake of the covid monetary response.

These values are in billions of USD; Notice the declines in both M1 & M2 last month. It has been a long time since this happened. Is this the start of a trend reversal?

If the three money measures in the chart above begin to decline in a meaningful way, we need to contemplate a possible price reversion for the asset classes.

 

 

 

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32 thoughts on “The major money stock measures just showed declines, is this a start of something ominous?

  1. Chris do you think we could see markets go up because investors would rather risk it in the market than loose it through inflation sitting on the sidelines?

    1. Think about this. The MSM and alt-media have been predicting one collapse after another. Look at the dire predictions for housing. Yet, what do we see? What about stocks? Not so bad. Interest rates are in the toilet and I keep reading the Fed will raise all the way to 3%. So what? The official CPI is over 8%.

      Not one person on the street I come across is bullish on anything. Guess what I do? I take the contra. Talk about lopsided sentiment.

      Look at the handful of stock I mentioned over the past couple weeks. Did you see them again today? There’s a bull market somewhere.

      Based on my methods, the markets will go up, because of the utter disbelief of the consensus. Rather than the FOMO of the young folk, it will go up as under deployed capital will have to back.

      A two level town house next door to me went under contract this week in four days for 30% more than late 2019, and they only put on a new roof. It was listed as a quick sale. The guy was military and was restationed to HI.

      1. Great thought Chris. I would not dump stocks never mind income producing real estate. Cash, gold, silver May be a way to get money out of the beast system but they don’t pay income and they don’t rise in value in real terms. Gold and silver just maintain value in real terms if that. Taking the contra is a great way to increase your wealth.

        1. Taking the contra is usually the way to go. I’m still keeping most of my income producing real estate. The alt media can talk about house crash all day; but as long as it’s bringing in stable monthly rent the price doesn’t matter.

  2. Since the beginning of the Ukraine crisis I have been saying it’s a big redevelopment plan. That does not say there is more to this conflict but it’s a major part of it.

    Here is a very recent article I found further making my point. Speaking in financial terms, I can’t help think big money is lining up to cash in on this massive project. For those who know the markets can this be an opportunity to invest in the construction or the tech that will go along with the project? Are the likes of Morgan Stanley chomping at the bit to get some low priced bonds or stocks?

    My thoughts are simply coming from the perspective that an epic amount of money will be made from all this but may be out of reach by the majority of the population.

    https://unece.org/housing-and-land-management/press/unece-coordinate-un-task-force-new-master-plan-city-kharkiv

  3. I suspect we may see the Antichrist make his appearance and craft a peace treaty. It could be soon, it could be a few years. Definitely coming this decade.

    The manufactured war can only be addressed with a manufactured peace.

    Doesn’t this all have a synthetic feel to it?

    Daniel describes this guy as a possible homosexual who will disregard the God of his fathers and will establish a peace accord.

    Some say Catholic prophecy says Francis is supposed to be the last pope. I can easily see him as the false prophet who will throw the laity under the bus.

    1. Interesting. No matter the country or circumstances, the global agenda and objectives move forward. It’s all coming together quickly now.

        1. The Ezekiel confederacy comes together.

          The problem with all these nations is that none of them are willing to run the ongoing trade deficits that are vital for any one of their currencies to be a transaction based, let alone a reserve, currency. A basket of their currencies is too clunky. The IMFs SDR has been DOA for 50 years. That would also mean these nations would have to somehow supply the reservoir needed to seed this basket. That comes from consensus, trade deficits, and deficit spending. None of these nations are able or willing to do that.

          This bloc has been discussing this alternative for the 20 years I have been following it. The new Soviet Union economy is too self-reliant and it prides its trade surpluses. The new Soviet Union can force other nations to trade only in rubles, but without running balance of payments and trade deficits needed to supply the world with the rubles needed, it will fail.

          Say I am a big producer of a needed good. I am more efficient and powerful than the other producers, but I demand payment in something in which my buyers lack. Guess what, I won’t be able to sell anything. This is the state of Putin’s dilemma.

          Which of these nations are going to fall on the sword? None of them. They are all too short sided to do what is necessary. As a result, their trade will always be fraught with mistrust of one another and will be highly inefficient.

          Just because these nations and the alt-media have the hate of the US in common doesn’t make it a proper framework in which to design an alternative financial system, let alone mimic the success of the dollar as a global reserve.

          These nations are going about this the wrong way, and they do not trust one another enough to build any alternative. This will be the catalyst at striking the West. It will be borne out of their failure and frustration.

          1. Interesting! I read Russia is smuggling its oil into EU thru the Middle East. Across the Atlantic too let’s hope

  4. I was asked which stocks I am currently holding. Here they are in no particular order.

    DSX (just went x-dividend on a 25 cent div.)
    GASS
    TGA
    TK
    TELL
    REI
    GLOP
    CPLP
    TGS

    I feel these are the new growth stocks of the New USSR world.

    I may trade them in and out.

    1. Thanks for answering my question. So many indicators to look at and appears the economy will continue the downswing, since each upcoming Fed meeting till September probably has a 50bp rate hike.

      Oil keeps going up and those stock picks look solid. I wonder about the Saudis sending all those tankers to our shores back in 2020 and tanked the sector to zero, which happened within a week time frame. I assume that was an obvious load up event for those in the know.

  5. Trump-backed Dr. Oz wins Pennsylvania GOP senate primary.

    Donald Trump is the worst possible thing to happen to the Republican party, or the best thing if you are a member of the synagogue of Satan. Dr Oz is degenerate and backs all sorts of degeneracy. He is as liberal as they come and it is terrible that he ran as a Republican. Trump only cares about impressing those with status and money. He’s a liberal scumbag from New York and his business dealings are horrible. Before the presidential election I used to listen to a couple of pastors who kept praying for Trump. I was praying for Trump as well, hoping he just vanish from the picture.

    Dr Oz will throw his constituents under the bus and vote for all sorts of gun control legislation. He backs all sorts of degeneracy to be taught to the children in schools under the guise of undoing hate. Reminds me of Michael Bloomberg when he ran as a republican for mayor. Bloomberg knew he couldn’t win the Democratic primary so he ran uncontested as a Republican and funneled about 100 million dollars into his campaign.

    Donald Trump is there to destroy the Republicans and merge them in to the one party collective like it is in the current Soviet Union.

    1. Oh i dont know there a plenty of worst things to happen to the Republican party out there. House and Senate minority leaders for 2. Trump is sure a bad judge of character no doubt about it. the main job of the parties is to keep the people distracted and divided.

  6. Ezekiel 7:19
    19 
    ‘They will throw their silver into the streets,
And their gold will be like refuse;
Their silver and their gold will not be able to deliver them
In the day of the wrath of the Lord;
They will not satisfy their souls,
Nor fill their stomachs,
Because it became their stumbling block of iniquity.

    I’ve thought about this verse frequently recently in the context of rising food and fuel prices I don’t feel like gold or silver have been a good inflation hedge at all like the alt finance are always pushing; in fact these past few years seem to have refuted it entirely for silver at least. So was Buffet right is it just a pet rock or are you still planning to hold some gold and silver?

    1. My underlying thesis regarding gold is simple; I own it as a hedge against personal catastrophe, as personal catastrophe insurance. It’s truly a means to get assets out of the system.

      I tell people to never buy gold or silver because they think that the system is going to collapse or to buy it for inflation. In that regard they’re going to be sorely disappointed. I tell people never to buy Bitcoin because of inflation. Income generating assets are a better hedge against inflation, since the cash flow at least tracks the growth in price inflation.

      1. Thanks I think your thesis has been proven correct. I recall you mentioned not too long ago picking up some gold eagles here and there- so do you ascribe to holding so much based on so many months of typical income/cash flow as an emergency/catastrophe fund or just some percent of net-worth or just pick up some here and there without a particular dollar value target?

        1. I just pick them up as I go along. No particular price point per se, unless I see a price drop. Anything below 1850 is okay here. When I have enough cash in a checking account I pick up three or four. I haven’t bought any more in the past 4-5 months. I need to build more cash to help with property management and put back for rehabs.

          If I speculate on gold, I typically trade futures or load up on GLD. I don’t really trade futures much anymore. Getting too old and don’t need the stress.

          Silver is too volatile for me as a monetary metal, with wide spreads. Still could be okay for silver bars.

          When I buy eagles now, I have no plans on selling. I did sell most my gold holdings in 2012-2014 to help pay for real estate. But that was strategic. Now, I have no plans on selling any of it. Slowly accumulate over time. Where I normally buy there’s a minimum 3 eagle purchase. Better price points.

          Whatever you do decide to buy, plan on never selling.

          1. Thanks; I’m kind of in a different boat in that I accumulated in the past based on faulty logic and am now trying to right those wrongs and determine how much I should retain and how much to sell. I know it’s the 11th hour but I’m trying to get cash to pursue my first rental property so I will probably sell enough to do that.

    2. ‘Their gold’ and ‘their silver’ – is it the actual gold and silver? or is it that fiat that’s been printed – until it loses value.

      1. Good point I’m not really sure but I’ve always figured it applies to actual gold and silver but also figured any fiat would be useless eventually in the context of revelation and eventually not being able to buy or sell without taking the mark.

      2. I like gold. The Chinese and Soviet Union are buying gold. I cannot predict the timeline to the mark, but we know it is coming close.

        We may have the fiat currency, but it still buys stuff.

  7. One more “crisis” caused by covid. The combo of heavy-handed rent moratoriums and long lasting restrictions, coupled with massive up front stimulus broke the backs of many smaller landlords, who are either now out of business or keeping units vacant.

    ‘My rent went up $500 a month’: Orange County leaders say rent issue is likely beyond their control

    https://www.wftv.com/news/local/my-rent-went-up-500-month-orange-county-leaders-say-rent-issue-is-likely-beyond-their-control/TCGXP3E4TRBBNF4R6ZSJBAMS6Y/

    A new study of rent prices in Orange County fell short of declaring a housing emergency despite the fact rent jumped 25% last year.

    The study, done at the request of commissioners, said the complex issue is likely beyond the county’s control.

  8. And just minutes before seeing this post I saw a headline saying Tesla to lay off 10% of its workforce. Not long ago on one of your topics I was thinking out loud how people can legitimately qualify for this over priced real estate. Is the house of cards beginning to fall? Cheap money propping up big companies beginning to dry up? Will investors pull money out of stocks and move into real estate sending housing prices even higher? I don’t fully understand the high level financial talk, but from my observation of past events, prices can only soar or fall so much for so long before the trend reverses.

    1. Because of inflation, the personal savings rate (light blue line), which spiked after the COVID stimulus was dispensed, not only gave back all its gains, but has fallen below the longer term trend line of 6-7%, and is now down to 4%. This also shows up as a drop in the personal savings (dark blue) to below its trend. This is because wages have not been keeping up with inflation, so the consumer compensates by tapping into savings.

      Personal savings accounts is part of money stock measurements. As consumers deplete their savings and perhaps their checking or demand deposit accounts as well, money stock measurements will begin to fall, ceteris paribus.

      Perhaps we are witnessing a planned contraction in the money supply to the longer-term trendline. Yes, a contraction in credit like the cause of the Great Depression.

      With the Fed rolling off $95 bil a month soon, we could really see the dial moving.

      1. Biden also seems to be talking about reducing the deficit and paying the debt. I believe he’s actually following through. I’ve seen a few people say this mirrors the actions of Clinton before the dot com bubble collpase.

        Biden also keeps trying to escalate the war in Ukraine, ensuring that oil and food prices will stay high. This means that the Fed will never see inflation come under control. They will continue hiking rates, to no effect on inflation, while the nation’s wealth collapses underneath. (This is just like in 2008 when the Fed was “blinded” by high oil prices.)

        So we have a convergence of monetary and fiscal “mistakes” in the backdrop of a war between two of the largest food and energy producers.

        If you believe Deagel, you should note that the explanation given for the population collapse is not war or pandemic but financial crisis. This financial crisis could be what is needed to bring in the Great Reset. At the rate things are going, CBDC’s will never happen because the system is too stable. They would be implemented only during a collapse, when all conservative solutions have failed.

        But I could also see the case for continued asset price increases. The Great Reset could either be a hard landing or a soft landing. I think it depends on whether the SoS wants to continue using the dollar or switch to CBDC/one world currency.

        1. Excellent observations in your first paragraph. Biden regime under orders by the s of S to restrain deficit spending for now. Second Clinton regime ran budget surpluses.

          The bottom line here is that the s of S controls the show and it’s up to us to figure out what they are going to do

      2. Thanks for your thoughts. The latest real estate trend of “are you effing kidding me?” home prices – as if we were pre 08 again – got me thinking that this can’t last. Something has to break. The MSM was saying this is not a bubble but I’m thinking it is in a different sense. Now I saw an article that says this is a bubble. https://fortune.com/2022/06/03/housing-market-might-be-bubble-dallas-fed-economist-home-prices-outlook/

        Pre 08, the paper boy qualified for a house and had a BMW in the garage, but after 08 people had to legitimately qualify for a loan. While things are different now, the rise and fall will have the same effects. The rise will consolidate more wealth to the few and the fall will hurt just as bad if not more.

        Covid was an instrument designed to destroy certain segments of the economy while boosting the chosen few. The work from anywhere platform took the commuter limit borders down. An Ethernet cable can turn a 200 mile round trip commute into a stumble from the bedroom to the coffee pot in the kitchen. Low priced homes that were impossible for commuting purposes became the new target for those looking to get out of $3K / mo. closet like studios in Silicon Valley and sending home prices to 100% increases in a years time.

        It’s difficult for me to stereotype a tech worker since my work is very technical and covers a broad range of subjects but may not fall under the common definition. I can’t help to think that those who over paid for housing are relying on wages that are far to generous for the work they do may be the first to own nothing and be happy.

        https://www.vice.com/en/article/bvz59w/tech-ceo-says-engineers-get-too-much-pay-and-benefits

        1. The two richest companies in the world are Apple and Microsoft. Tech workers have such generous salaries and benefits because they are in demand. No one at Microsoft is ever on call because someone in the world starts their shift as the last rotation is ending theirs. Companies can threaten to outsource all they want but there still wouldn’t be enough supply to meet demand for software engineers (currently).

    2. To answer your question about cheap money; I assume money will be cheap in real terms, but I see it as being difficult to come by. Only the large and best credits will prevail.

      As for real estate, I could see it going either way. In a linear environment, higher mortgage rates will make it tougher to buy.

      In a dynamic environment, however, higher inflation causes rents to rise more than trend, which can offset higher borrowing rates. Moreover, I believe that RE is a traditional inflation hedge and if investors lose more confidence in the Fed and central banks, we could see a knee jerk reaction as you theorize into RE.

      People seem to be using the late 70s as a template, whether that is accurate or not.

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