He can prevent them from flooding the economy by raising the rates paid on them, but that will cause the stock market to crash as M2 supply growth shrinks to nothing. Whatever he does, he'll be screwed from the other direction.
Thanks for the article. Inflation theorists tend to forget the elephant in the room. There is $1.8T in excess reserves at the Fed waiting to flood the economy when rates go up. That will result in stagflation. QE isn't going anywhere, it's all staying at the fed. Money supply growth is at a measly 3.9%. See my piece on this here, you may enjoy it:
Market Running On Fumes, Prepare Your Exit Strategy [View article]
Thanks for replying Jeb, looks correct. These drops are negligible in and of themselves, but if they continue it will be meaningful. It looks like M2 may be stabilizing for now, but we're still dangerously close to a precipice.
Market Running On Fumes, Prepare Your Exit Strategy [View article]
Money does not seasonally adjust. "Seasonally adjusted money" is a nonsense number. Money is money, however much is out there is however much is out there. Use the non seasonally adjusted 13-week average, first and last number on each sheet. Using a shorter average will give you too many bumps and false positives.
Market Running On Fumes, Prepare Your Exit Strategy [View article]
Jeb,
The reason excess reserves were zero before 2008 is that the banking system has always been fully loaned up. Banks thought they could make more money lending out rather than earning interest with excess reserves. They jumped up momentarily right before 9/11 (strange, huh?) but went back down.
The '08 financial crisis was a total meltdown of the fractional reserve banking system that never happened before as loans started defaulting left and right with the epicenter in the mortgage backed security system at Fannie Mae. There were two choices. Either let the liquidation happen and say goodbye to fractional reserve for a more honest banking system, say 100% reserve, or print money like mad and save all the bad loans.
The Fed chose the second option. This time, the banks did not touch that money, thinking it's better to leave a whole bunch at the Fed rather than lend it all out again and go bust, as happened before. When confidence starts picking up, however, that money will start coming out. When it does, inflation will necessarily skyrocket.
3% is not a scientific number, but if you do the research on past money supply stats, you'll see that it constitutes a sort-of tipping point beyond which money supply growth usually goes negative. It's not an iron rule though.
Market Running On Fumes, Prepare Your Exit Strategy [View article]
On the periphery, yes. But insignificantly so. The standard wrong view is that lowering interest rates takes money out of bonds and into risk assets.
The correct view is that the new money that went to buying the bonds goes into the hands of big banks who then take it and put it into the stock market. Small-time investors then follow the trend to add to it a little, but the direct cause is the new money itself, not the Fed encouraging already existing money to go long.
4 Scary Charts Warning Of The Next Financial Crisis [View article]
I came to similar investment conclusions from a different angle. The yen is about to be destroyed. The dollar will follow. QE won't end until the dollar drowns.
Market Running On Fumes, Prepare Your Exit Strategy [View article]
Daily ups and downs due to news I cannot predict. I only know that if money supply grows, so does the market, same with shrinking. These are trends, not intraday moves.
Market Running On Fumes, Prepare Your Exit Strategy [View article]
John -
That is the absolute M2 number graph, not the rate of growth. I'm tracking the annualized quarterly rate of growth over the 13-week average, which clears out the bumps. Sort of like the derivative in calculus terms. You're looking at the position. I'm looking at the velocity.
Market Running On Fumes, Prepare Your Exit Strategy [View article]
QE won't end until the dollar is destroyed. Then the cuts will come from everywhere.
The Fed does not understand the implications of its own actions. They do not understand that money supply growth means stock market growth. They think it all has to do with interest rates and encouraging high risk from money that is already there.
Is This The Real 'Sell-Off'? [View article]
He can prevent them from flooding the economy by raising the rates paid on them, but that will cause the stock market to crash as M2 supply growth shrinks to nothing. Whatever he does, he'll be screwed from the other direction.
Is This The Real 'Sell-Off'? [View article]
http://seekingalpha.co...
Cyber Security The Next Big Thing In Internet Stocks; Lessons From The Tech Bubble [View article]
Market Running On Fumes, Prepare Your Exit Strategy [View article]
Market Running On Fumes, Prepare Your Exit Strategy [View article]
Market Running On Fumes, Prepare Your Exit Strategy [View article]
April 25 means the data that were released on April 25. Not the data for April 25. There is a 10-day lag. See here:
http://1.usa.gov/t3km2w
Market Running On Fumes, Prepare Your Exit Strategy [View article]
The reason excess reserves were zero before 2008 is that the banking system has always been fully loaned up. Banks thought they could make more money lending out rather than earning interest with excess reserves. They jumped up momentarily right before 9/11 (strange, huh?) but went back down.
The '08 financial crisis was a total meltdown of the fractional reserve banking system that never happened before as loans started defaulting left and right with the epicenter in the mortgage backed security system at Fannie Mae. There were two choices. Either let the liquidation happen and say goodbye to fractional reserve for a more honest banking system, say 100% reserve, or print money like mad and save all the bad loans.
The Fed chose the second option. This time, the banks did not touch that money, thinking it's better to leave a whole bunch at the Fed rather than lend it all out again and go bust, as happened before. When confidence starts picking up, however, that money will start coming out. When it does, inflation will necessarily skyrocket.
3% is not a scientific number, but if you do the research on past money supply stats, you'll see that it constitutes a sort-of tipping point beyond which money supply growth usually goes negative. It's not an iron rule though.
Market Running On Fumes, Prepare Your Exit Strategy [View article]
((13-week avg NSA latest / 13-week avg NSA earliest) -1) *4
It's a 12-week spread from latest to earliest, so multiplying by four is 48 weeks, roughly annual.
Market Running On Fumes, Prepare Your Exit Strategy [View article]
The correct view is that the new money that went to buying the bonds goes into the hands of big banks who then take it and put it into the stock market. Small-time investors then follow the trend to add to it a little, but the direct cause is the new money itself, not the Fed encouraging already existing money to go long.
4 Scary Charts Warning Of The Next Financial Crisis [View article]
I think you'd enjoy this approach:
http://seekingalpha.co...
Market Running On Fumes, Prepare Your Exit Strategy [View article]
Market Running On Fumes, Prepare Your Exit Strategy [View article]
That is the absolute M2 number graph, not the rate of growth. I'm tracking the annualized quarterly rate of growth over the 13-week average, which clears out the bumps. Sort of like the derivative in calculus terms. You're looking at the position. I'm looking at the velocity.
Market Running On Fumes, Prepare Your Exit Strategy [View article]
You're welcome. Go here:
http://1.usa.gov/Hh0NmH
scroll down to the H.6 numbers under money supply. They come out every friday.
Market Running On Fumes, Prepare Your Exit Strategy [View article]
Market Running On Fumes, Prepare Your Exit Strategy [View article]
The Fed does not understand the implications of its own actions. They do not understand that money supply growth means stock market growth. They think it all has to do with interest rates and encouraging high risk from money that is already there.
The emperor has no clothes.