The Money Supply and you - meltdown or meltup?

[Bindare_Dundat]

This statement is going to test people's beliefs on here....some here believe that the dow is 30k due to market forces.   

The money that a majority of people are spending is stimulus and debt. Earning power has decreased greatly for most while money at the top is sloshing around to the 1%. They are postponing rents and evictions for a reason. Everything has the feel of being a placeholder.

Wonder when people start drawing their 401k accounts as income? What could go wrong?

I'm just using the numbers central banks use when calculating inflation rate. However if you were to take into consideration the rise in prices of certain asset classes, inflation is much higher.  All depends on whos numbers you use.
I am of the opinion that inflation is way higher then the .07% they claim.

[Bindare_Dundat]

I still call bullshit.

She has more than one place

[Mayday]

I'm just using the numbers central banks use when calculating inflation rate. However if you were to take into consideration the rise in prices of certain asset classes, inflation is much higher.  All depends on whos numbers you use.
I am of the opinion that inflation is way higher then the .07% they claim.

The overall gross inflation for the US during 2020 was 24%.

CPI (consumer inflation) for the US during 2020 was 1.2%

[IroNat]

The overall gross inflation for the US during 2020 was 24%.

CPI (consumer inflation) for the US during 2020 was 1.2%

Source?

[Mayday]

Here is an example for you guys that shows why i say the world is trying to fight off deflation.

More debt has been accumulated than there is increase in the money supply. The velocity has dropped to 1.1. meaning injected money isn't flowing through the economy at the previous last decade rate of 1.5.

 The 2020 vs 2019 numbers are below meaning today a debt to GDP of 131% on the 1st January 2021 with lock downs, restrictions, high unemployment, salary cuts etc...... i always expected 2021 to see a much larger increase in debt/QE than in 2020. Perhaps this year we may actually see some CPI increase to help ease the pain.

2019 GDP 21.4T
2020 GDP 20.8T
Change -0.6T

2019 US Debt 22.6T (106% of GDP)
2020 US Debt 27.2T (131% of GDP)
change +4.5T

2019 M2 15.4T
2020 M2 19.2T
change +3.8T

[pellius]

Jeeze, it's almost at $37,000 right now. I remember two weeks ago when it was in $19,000 territory. That's $17,000 increase in two weeks. How long did it take to get to the magical $5,000 that everyone was raving about and which started this thread?

[Mayday]

Source?

Federal Reserve Bank.

I track the money supply along with gold, inflation and debt for the US and my country. All data is published.

[Bindare_Dundat]

The overall gross inflation for the US during 2020 was 24%.

CPI (consumer inflation) for the US during 2020 was 1.2%

Thanks for the correction. I was going off the top of my head.

[Bindare_Dundat]

Here is an example for you guys that shows why i say the world is trying to fight off deflation.

More debt has been accumulated than there is increase in the money supply. The velocity has dropped to 1.1. meaning injected money isn't flowing through the economy at the previous last decade rate of 1.5.

 The 2020 vs 2019 numbers are below meaning today a debt to GDP of 131% on the 1st January 2021 with lock downs, restrictions, high unemployment, salary cuts etc...... i always expected 2021 to see a much larger increase in debt/QE than in 2020. Perhaps this year we may actually see some CPI increase to help ease the pain.

2019 GDP 21.4T
2020 GDP 20.8T
Change -0.6T

2019 US Debt 22.6T (106% of GDP)
2020 US Debt 27.2T (131% of GDP)
change +4.5T

2019 M2 15.4T
2020 M2 19.2T
change +3.8T

Are you aware of any program that was done to test if prolonged negative interest rates would get the economy going again?
I watched so many videos oflver the last few days that I'm losing or mixing up some of the information. The results weren't released yet and probably won't as many people are assuming it was a failure. Ill try and find the name of it if it doesn't ring a bell for you.

[Mayday]

Are you aware of any program that was done to test if prolonged negative interest rates would get the economy going again?
I watched so many videos oflver the last few days that I'm losing or mixing up some of the information. The results weren't released yet and probably won't as many people are assuming it was a failure. Ill try and find the name of it if it doesn't ring a bell for you.

They have had negative rates in some European countries for a few years. Doesn’t work.

The problem today is central banks are so scared of The CPI so they lead everyone down the path of debt and now look where we are...... utterly fucked.

Central banks will get there in the end. Can’t be avoided.

[SOMEPARTS]

They've already printed enough money to front run 100 years of future prosperity.

[OneMoreRep]

The writing is on the wall. With a democratic president + congress, you know that:

• The FED will continue to print money + keep interest rates low in order to keep our economy on life support
• Government spending WILL rise, because that's the name of the game when working with a Democratically runned White House
• Increased taxation on corporations + the wealthy and increased corporate regulations will ensue
• Public assistance programs will run up our national debt (not just welfare, but social security and pensions).
  
• Inflation WILL rise due to all this money being pumped into the system.

Our national Debt-to-GDP ratio continues to rise. New inflation rates (CPI) will be released later this month (January 13, 2021) with Bloomberg forecasts suggesting increases well towards the mid 2% range. GDP price index also continues to rise and at the end of the month we will have a better idea of what the new numbers reveal.

Brace yourselves, as a Biden white house will increase spending (it's their knee jerk reaction). In order to fund their spending, they will both increase taxes and ask Uncle FED to chip in. Taxes will affect everyone. It won't just be corporations or the rich. Corporations will pass down the burden of taxes to the poor and midle class by increasing the prices to their products and services in order to offset the hit from increased taxation. Furthermore, the poor will feel the effects from those necessary price increases and will feel the underlying effects of inflation from the continuous QE from the FED. Still, the poor will spend like there's no tomorrow, because that is this generation's crack cocaine, spending is the only thing many of the poor do to push away their harsh reality (ie "As long as I look rich, I might start to feel and believe it").

I've said it before and I'll say it again, our economy is headed to the shitter and fast. Look to China as the new economic world power.

"1"

[IroNat]

Federal Reserve Bank.

I track the money supply along with gold, inflation and debt for the US and my country. All data is published.

"

Link to your info?

Current Report June 12, 2020:

https://www.federalreserve.gov/monetarypolicy/2020-06-mpr-summary.htm

Inflation

Consumer price inflation has slowed abruptly. The 12-month change in the price index for PCE was just 0.5 percent in April. The 12-month measure of PCE inflation that excludes food and energy items (so-called core inflation), which historically has been a better indicator of where overall inflation will be in the future than the total figure, fell from 1.8 percent in February to 1.0 percent in April. This slowing reflected monthly readings for March and April that were especially low because of large price declines in some categories most directly affected by social distancing. Overall inflation also has been held down by substantially lower energy prices, which more than offset the effects of surging prices for food. Despite the sharp slowing in inflation, survey-based measures of longer-run inflation expectations have generally been stable at relatively low levels. However, market-based measures of inflation compensation have moved down to some of the lowest readings ever seen."


Federal Open Market Committee
September 16, 2020

https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20200916.htm

[Bindare_Dundat]

They have had negative rates in some European countries for a few years. Doesn’t work.

The problem today is central banks are so scared of The CPI so they lead everyone down the path of debt and now look where we are...... utterly fucked.

Central banks will get there in the end. Can’t be avoided.

Thanks. Can you help clarify what they mean by soaking up access liquidity out of the system? I hope I said that right and used it in the roper context. Please excuse my ignorance.  I'm still trying to figure it all out. What steps would they have to take to keep inflation from spiraling out of control if the economy picks up and with such a huge money supply. In other words, how would they reign it all in before it goes out into peoples hands? Thanks again.

[Mayday]

"
Link to your info?

I perform my own calculations but it's not something i share, sorry. I post a lot of my feedback here. You will see my predictions and either i'm right or i'm a useless twit that should be ignored.

[Mayday]

Thanks. Can you help clarify what they mean by soaking up access liquidity out of the system? I hope I said that right and used it in the roper context. Please excuse my ignorance.  I'm still trying to figure it all out. What steps would they have to take to keep inflation from spiraling out of control if the economy picks up and with such a huge money supply. In other words, how would they reign it all in before it goes out into peoples hands? Thanks again.

I'd need the full context regarding 'soaking up excess liquidity' because you can see from the masses of QE liquidity is something they are trying to create. If you are having to create liquidity, you have a shortage of it to begin with.

We are in a depression which is a period of depressed GDP growth, a result due to a lack of inflation of the money supply. 2020 GDP -3% and in 2021 we will be in a global recession yet again due to the lockdowns. They are fighting off deflation at the moment but also preventing CPI inflation which is why the rich are having a banger of a year and the rest of us are getting crushed.

For simplicity's sake if you want higher GDP growth, you require higher currency devaluation which will result in higher CPI, higher wage growth and a devaluation of your existing debt (monetisation of debt).

This is what CPI looked like over the decades - note CPI is our daily basket of goods only, not property and other stuff.......
1913-1919 --> 9.8%
1920-1929 --> 0.38% (central banks limited currency devalution to decrease inflation)
1930-1939 --> -2.08% (great depression a result of central banks refusal to devalue currency)
1940-1949 --> 4.86%
1950-1959 --> 1.82%
1960-1969 --> 2.45%
1970-1979 --> 7.25%  (gold std abandoned and monetary devaluation ramped to pay off existing debt and create a boom)
1980-1989 --> 5.82%
1990-1999 -->3.08%
2000-2009 --> 2.54%
2010-2019 --> 1.86%
2020         --> 1.2%
2021 target--> 2%

For simplicity's sake again, if in 2019 you spent $100/week on all your daily shit, after 2020 those same things cost you $101.2 and after 2021 it will cost you $103.22   Keeping in mind you will have different spending habits - less expensive takeaway and more cheaper supermarket/home food which will be accounted for in the CPI.

To all the people claiming to be drowning in CPI, sorry but that simply isn't happening. There is broad misunderstanding of CPI and inflation in general.

[Primemuscle]

This is all good and well. However, there are plenty of corporations, companies and businesses currently using Covid-to their financial advantage by marking up their products. I don't pay really close attention to what I spend at the grocery store so a 2% inflation rate would definitely go unnoticed by me. I'm buying the same stuff I have always bought for a longtime and in similar quantities yet the tab is noticeably higher after the clerk totals it these days then it was a year ago.

[Mayday]

This is all good and well. However, there are plenty of corporations, companies and businesses currently using Covid-to their financial advantage by marking up their products. I don't pay really close attention to what I spend at the grocery store so a 2% inflation rate would definitely go unnoticed by me. I'm buying the same stuff I have always bought for a longtime and in similar quantities yet the tab is noticeably higher after the clerk totals it these days then it was a year ago.

I know, i am actually one of the people making the decision on the in store prices lol. I have made a few posts about that but they get lost in a big thread.

Volumes have dropped during 2020 so i did not discount as often or as deep. Consumers pay more. Simple.

My costs have not increased from suppliers. I changed the promotional strategy to earn more total profit instead of seeing it drop on lower volume.

What gets people confused over the CPI is the weighting which is adjusted to consumer behaviour.

Lets say you walk into a furniture shop and prices are clearly 10% higher than the last time you were in there. The reality is you buy furniture once every 5yrs not every single week like milk and bread. The CPI is adjusted for that timeline.

What always surprises me is people complain about their hamburger going up a buck yet when their property goes up 100k that's perfectly fine......

[Mayday]

This is all good and well. However, there are plenty of corporations, companies and businesses currently using Covid-to their financial advantage by marking up their products. I don't pay really close attention to what I spend at the grocery store so a 2% inflation rate would definitely go unnoticed by me. I'm buying the same stuff I have always bought for a longtime and in similar quantities yet the tab is noticeably higher after the clerk totals it these days then it was a year ago.

Don't take my post as a dig BTW. I pretty much rarely have a go at someone on here, i try and help.

You need to remember they are not bailing out average joe yet. I think for the US the first stimulus round of 2.4T the peasants received 0.3T (13%) the rich got 87%. In the latest proposal of the 1.8T stimulus the payments to the peasants will be 0.18T (10%). The rich will get 90%.

It is not possible for consumers to claim they are experiencing financial hardship and at the same time claim they are drowning in inflation from a $600 stimulus cheque....... perception is heavily skewed by bias, that's why there is data.

Below is my actual price forecast for Gold which is created using my own calculations from the money supply. If i apply my own CPI calculation to the price of hamburgers, this is what you can expect to see in real life.

I suggest by 2023 we would be having a major property boom. You need to remember, they have not started to bail out the average consumer yet. They are currently bailing out the rich. The bailout for the rest of us will be finalised during 2021 and by 2022+ we will start to see an inflationary impact on the CPI and property.

This is the impact you will see in real life when they finally start to let inflation go.

Gold Price
2020 - 1,889
2021 - 3,022
2022 - 4,443
2023 - 10,574
2024 - 14,169
Change 650%

Hamburgers
2020 - 6.50
2021 - 7.20
2022 - 8.01
2023 - 9.05
2024 - 10.23
Change 57%

[TheGrinch]

Don't take my post as a dig BTW. I pretty much rarely have a go at someone on here, i try and help.

You need to remember they are not bailing out average joe yet. I think for the US the first stimulus round of 2.4T the peasants received 0.3T (13%) the rich got 87%. In the latest proposal of the 1.8T stimulus the payments to the peasants will be 0.18T (10%). The rich will get 90%.

It is not possible for consumers to claim they are experiencing financial hardship and at the same time claim they are drowning in inflation from a $600 stimulus cheque....... perception is heavily skewed by bias, that's why there is data.

Below is my actual price forecast for Gold which is created using my own calculations from the money supply. If i apply my own CPI calculation to the price of hamburgers, this is what you can expect to see in real life.

I suggest by 2023 we would be having a major property boom. You need to remember, they have not started to bail out the average consumer yet. They are currently bailing out the rich. The bailout for the rest of us will be finalised during 2021 and by 2022+ we will start to see an inflationary impact on the CPI and property.

This is the impact you will see in real life when they finally start to let inflation go.

Gold Price
2020 - 1,889
2021 - 3,022
2022 - 4,443
2023 - 10,574
2024 - 14,169
Change 650%

Hamburgers
2020 - 6.50
2021 - 7.20
2022 - 8.01
2023 - 9.05
2024 - 10.23
Change 57%

soooo... I just invest in index funds SPX/INDU/NAZ and make a killing.....   DOW should be 200k by that time!!

[Mayday]

soooo... I just invest in index funds SPX/INDU/NAZ and make a killing.....   DOW should be 200k by that time!!

Not necessarily...... i'll explain.

In broad terms shares are valued based on analysis of revenue, profit, dividends, growth potential.

The problem with QE is you are inflating the price without inflating any of the metrics. As a result, your analysis of the metrics begins to blow to pieces.

The longer you continue QE, the more distance you put between the price and the metrics, the less confidence buyers have in the market.

QE is fine if it's there to prevent utter destruction and in place only for a short duration.

It is completely moronic to have a pandemic where the country is shut down and the Dow is 20% higher than mid 2020..... QE isn't supposed to be used for that, it is supposed to be used to prevent it going to 10k....... markets are supposed to managed themselves, not for the Govt to become involved and artificially ramp them.


The risk in 2021 and on is if QE keeps up and they inflate the Dow to 50k-60k, the metrics halve vs 2020. As a result, confidence leaves the market and money will look for an asset class based more upon the usual market participation.

That doesn't mean don't go into shares but it does mean you need to be on your toes.

[Marvin Martian]

Pretty scary huh?

The Federal Reserve already owns about 34% of outstanding mortgage bonds (MBS). That means that they own 1/3rd of all outstanding mortgages (i.e. homes in the market). This is dangerous, when you consider that if a homeowner defaults on a mortgage, the bondholders (the Federal Reserve in this case) have a claim on the value of the homeowner's property. The property can be liquidated with the proceeds used to compensate bondholders (i.e. The Fed). Put 3 home owners in a room with individual mortgages and one of their homes is essentially owned by the FED.

Additionally, the Federal Reserve already holds about $7 trillion in US debt (a little under half of the actual US GDP & stated differently about 20% of total US debt). Counter-argument to this is that of course another 78% ($21 Trillion) of US debt is owned by the public (in the form of Social Security and pension funds), but even so, this is a terrible direction we are heading in.

"1"

The problem is that 95% (maybe more) of Americans are blissfully ignorant of these things. We receive zero financial education in school - and I am realizing that the vast majority of those who work in the financial sector don't ”truly” understand long term ramifications and simply sell the products that they are told or that earn them the highest commission.
I don’t say this as someone who thinks I have it “all figured out”. I’ve realized how little I truly understand and am investing a ton of time and resources into education.

[OneMoreRep]

The problem is that 95% (maybe more) of Americans are blissfully ignorant of these things. We receive zero financial education in school - and I am realizing that the vast majority of those who work in the financial sector don't ”truly” understand long term ramifications and simply sell the products that they are told or that earn them the highest commission.
I don’t say this as someone who thinks I have it “all figured out”. I’ve realized how little I truly understand and am investing a ton of time and resources into education.

BIN-FUCKING-GO!

You're absolutely right my friend. The vast majority of people don't know these things and MANY of those in the financial sector (traders) don't understand these concepts and are instead more concerned with selling you products for commission.

Understanding both micro and macro economics and basic history (particularly US, British, Dutch, China, Russian history) will go a VERY long way in providing answers in terms of what's going on and what direction we're headed towards. If you know the ins/outs of economics and have a strong grasp surrounding the US economy, you will know WHY politicians do what they do and what masters they serve. Additionally, if you know economics, you will understand what bait (in the form of laws and economic packages) is best to control the poor.

I've considered suggesting the creation of a subforum here for Economics & Finance. I just don't know if many members will participate or be interested.

"1"

[Griffith]

The problem is that 95% (maybe more) of Americans are blissfully ignorant of these things. We receive zero financial education in school - and I am realizing that the vast majority of those who work in the financial sector don't ”truly” understand long term ramifications and simply sell the products that they are told or that earn them the highest commission.
I don’t say this as someone who thinks I have it “all figured out”. I’ve realized how little I truly understand and am investing a ton of time and resources into education.

Exactly.

Most in 'finance' are salesman, mainly investment brokers and insurance salesman.

They tend to have only a basic understanding of economics as it's not their area of expertise or study.

[Marvin Martian]

BIN-FUCKING-GO!

You're absolutely right my friend. The vast majority of people don't know these things and MANY of those in the financial sector (traders) don't understand these concepts and are instead more concerned with selling you products for commission.

Understanding both micro and macro economics and basic history (particularly US, British, Dutch, China, Russian history) will go a VERY long way in providing answers in terms of what's going on and what direction we're headed towards. If you know the ins/outs of economics and have a strong grasp surrounding the US economy, you will know WHY politicians do what they do and what masters they serve. Additionally, if you know economics, you will understand what bait (in the form of laws and economic packages) is best to control the poor.

I've considered suggesting the creation of a subforum here for Economics & Finance. I just don't know if many members will participate or be interested.

"1"

If you can get a sub forum - I would 100% be interested. I’m sure there are a ton of guys who may not post a lot here but would definitely love a place to discuss Economics.