Tuesday, 16 May 2017

A Main Determinant of Financial Stability Has Turned Volatile

From December 2014 to October 2016 the y/y money supply growth rate for the U.S. experienced a period of unprecedented stability based on data covering the last 28 years. This might very well have contributed to the financial stability also experienced in recent years.

But now the volatility of the money supply growth rate has picked up remarkably in recent months. The question then becomes if recent developments will be a precursor for increased market volatility as well.

Also notice how the 2000 and 2008 financial turmoil were preceded by record-low levels of volatility in the money supply growth rate. Whatever the case may be, one thing is for sure: increased money supply volatility is not ideal for financial markets, especially when it's driven be a declining growth rate as is the case today. 

Sunday, 7 May 2017

Potential Crash Charts of The Day

Updated as of 5 May 2017

Thursday, 4 May 2017

Chart of The Day V: FOMC Interest Rate Conundrum - Raise (economic crash) or Not To Raise (inflation target smashed)

Chart of The Day IV: U.S. Productivity Growth Tanks As Investments' Share Of Money Supply Remains Near Record Low

As of Q1 2017

Chart of The Day III: Capital Consumption, Not Growth!

As of Q1 2017

Chart of The Day II: Gold Deflated Net National Product per Capita for the U.S.

Chart of The Day: Which One Will Turn First?

As of Q1 2017

Wednesday, 3 May 2017

The Fed Will Likely Chicken Out on Planned Rate Hikes

By Thorsten Polleit,

The Austrian business cycle theory tells us that the injection of new money created through bank lending out of thin air causes an artificial boom; and that the slowdown of credit and money creation, let alone a decline in available loanable funds, turns the boom into bust. Recent bank lending data in the US show a noticeable slowdown in bank lending rates, setting in around autumn 2016. Does it signal trouble down the road?

There is no easy answer to this question. Various forces are at work. As far as the supply side is concerned, banks may have tightened their lending standards due to higher delinquency rates, restricting access to new loans. Banks may also sell off credit exposure to non-banks such as, for instance, mutual funds, insurance companies etc. Both developments would actually translate into a decline in the level of bank lending aggregates and thus their growth rates.

Continue reading the article here.

Tuesday, 2 May 2017

Central Banks' Obsession with Price Stability Leads to Economic Instability

By Frank Shostak

For most economists the key factor that sets the foundation for healthy economic fundamentals is a stable price level as depicted by the consumer price index.

According to this way of thinking, a stable price level doesn’t obscure the visibility of the relative changes in the prices of goods and services, and enables businesses to see clearly market signals that are conveyed by the relative changes in the prices of goods and services. Consequently, it is held, this leads to the efficient use of the economy’s scarce resources and hence results in better economic fundamentals.

Read the full article here.

Also see: 

The Contradictory Missions Of Central Banking: Stable Price Inflation And Economic Stability

Chart of The Day: The Money Relation (Mar-17)

The money relation (the relation between the demand for- and the supply of money) indicator for March was again above zero which suggests there still might be some time left until financial turmoil once again sweeps the U.S. shores.