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Created on: 7/5/2022 3:29:07 PM Last Update: 7/5/2022 4:01:22 PM Posted by: RTT
WARNING: This entry is 268 days old. It may contain broken links, out-dated or misleading content. Please read on with caution.
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Money supply crash will force a sharp FED reaction
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 The FED money supply pump and dump will have to be followed by another pump if they want to avoid a depression.
In the chart 1 below, M2 money (blue line) shows the COVID pump and dump by the FED. Yes this is the FED's mess, a panic reaction to COVID, and now a panic reaction to the inflation the FED created.
True Money Supply (TMS, red line) is M2 less time constraint money (money in time lock deposits), so this is ready cash to spend in 24 hours and a much better forecaster of the economy in 12 or 18 months time.
Money supply also suffers from purchasing power effects (inflation), so M2 and TMS have been adjusted for inflation in the chart below.
When ever the red line (TMS) sinks below the zero line a recession has followed in the months ahead, then what are we going to get in 2022/23 after the sharp crash of TMS (red line)?
In 1994/95 the TMS fell below the zero line, yet no recession followed, this was due to the very low oil price at the time. Therefore when the red line falls below the zero while oil has been high a recession is highly likely to follow in the months ahead (subject to the FED timed reaction with monetary policy).
The Chicago financial conditions index has not yet sunk to the lower gray line (@@CHCR), so no recession yet. The FED made this mess, and the FED can fix this mess. But they will be late, so we shall have a few quarters of terrible growth. A transfer of wealth to the informed will be made in the coming tough economic quarters. Let you be the informed!
Chart 1
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Investing Quote...
..“In a narrow market, when prices are not getting anywhere to speak of but move within a narrow range, there is no sense in trying to anticipate what the next big movement is going to be. The thing to do is to watch the market, read the tape to determine the limits of the get nowhere prices, and make up your mind that you will not take an interest until the prices break through the limit in either direction.”..
Jesse Livermore
..."The four most dangerous words in investing are 'This time it's different' "...
John Templeton
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Pericles
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