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Post by uncleharley on Dec 4, 2023 21:17:22 GMT
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Post by Norbert on Dec 4, 2023 21:53:41 GMT
I also know little about the dynamics of money supply, but here's a 10-year chart for M2. (Click to enlarge.) Taking a longer view than Siegel does, we see that M2 soared to the moon in recent years. The little blip that Siegel talks about doesn't appear meaningful. It's the unconventional Fed policies like QE, ZIRP, Covid handouts, plus massive fiscal deficits, that pushed M2 and everything else (e.g., RE and stock prices) to such lofty highs. Siegel can talk about wanting M2 to rise even further, but I'm personally more concerned about the massive indebtedness I see everywhere. Well, maybe he's right. Party on! Don't worry, be happy? 😄 N.
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Post by uncleharley on Dec 4, 2023 21:59:59 GMT
That chart might be making a case for buying gold with dollars. It would be less steep if the chart was spread out a bit.
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Post by Norbert on Dec 4, 2023 22:16:34 GMT
True, but M2 did pop by about a third in 2020. That's a damn steep rise no matter how we chart it.
I've felt for some time that the 2020 "bubble" would take some time to work off. Maybe Siegel is on to something with his M2 observation.
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Post by yogibearbull on Dec 4, 2023 22:18:36 GMT
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Post by uncleharley on Dec 5, 2023 13:04:21 GMT
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Post by Chahta on Dec 5, 2023 13:20:05 GMT
I believe that sharp rise in money supply fueled inflation that seemed to come out of nowhere. Deficit spending the last few years, including Covid spending, caused the sharp rise.
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Post by steelpony10 on Dec 5, 2023 14:47:50 GMT
www.theglobaleconomy.com/rankings/fiscal_balance_percent_GDP/ I think the U.S. deficit to GNP percentage is in the Samoa, Palestine area. Biggest economy = biggest dollar deficit in the world. The taxes from job creation and the spillover outweigh deficits. Who do you think is going to get the lions share of the reconstruction contracts for years to come in Ukraine? I don’t know about the factual return on border walls. So good and bad deficit spending? Or is it worth the investment? If deficits ever became a problem they are negotiable as other countries have done. Norbert , is correct party on.
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Post by mnfish on Dec 13, 2023 13:59:09 GMT
From an article in the National Review - The Economy Is Running on Fumes. A Recession Is Right around the Corner"Money is the economy’s fuel. When it surges, nominal GDP (real GDP plus inflation) surges. When it plunges, spending plunges." Quantity Theory of Money” by Milton Friedman Jerome Powell testified during the Fed’s February 2021 semi-annual monetary-policy report to Congress, monetary aggregates, such as M2, do “not really have important implications for the economic outlook . . . that classic relationship between monetary aggregates and economic growth and the size of the economy, it just no longer holds.” "As it turns out, the Fed, since early 2020, has dished up monetary data that presents us with a clear natural experiment. With the onset of Covid, the Fed hit its monetary accelerator, causing M2 to explode, reaching an unprecedented annual rate of growth of 26.7 percent in February 2021." "Since March 2022, the money supply has been falling like a stone." "Given the current course of M2’s contraction, we now forecast that inflation will fall below the Fed’s 2 percent target in 2024 and decline further into outright deflation in 2025." "By rejecting the quantity theory of money and the money supply, Powell and the Fed have given us whiplash: first an unprecedented explosion in M2 and now a contraction that, to date, is already the third largest in the Fed’s history." "And what did the four prior episodes of monetary contraction produce? With a lag, they all produced a recession. It’s time to buckle your seatbelts." "But before doing so, it’s worth asking, why have Powell and the Fed filled our heads with a string of non-monetary causes for inflation? Remember the supply-chain problems and “high” oil prices that the Fed and “team transitory” trotted out to explain why we were feeling the pain of inflation?"
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Post by mnfish on Dec 13, 2023 14:01:56 GMT
And a snippet from the Quantity Theory of Money
"suppose that the quantity of money unexpectedly increases so that individuals have larger cash balances than they wish to hold. They will then seek to dispose of what they regard as their excess money balances by paying out a larger sum for the purchase of securities, goods, and services, for the repayment of debts, and as gifts, than they are receiving from the corresponding sources. However, they cannot as a group succeed. One man’s spending is another man’s receipts. One man can reduce his nominal money balances only by persuading someone else to increase his. The community as a whole cannot in general spend more than it receives; it is playing a game of musical chairs."
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Post by johntaylor on Dec 13, 2023 14:42:03 GMT
Re Hanke (econ prof J Hopkins) article, perhaps they trotted out non-monetary explanations for self-exculpation after the spending on lockdown relief and 200 b to Ukraine?
Don't big increases in M2 send more money chasing relatively more fixed supplies of goods/services, ergo inflation?
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