Friday, 4 October 2013

The Short Version of the "Austrian" True Money Supply (TMS), as of 23 September 2013

The short version of the Austrian True Money Supply contracted by 0.61% (-27.12% annualised) during the most recent week ending 23 September to hit USD 9.5222 trillion calculated based on monetary statistics just released by FRED

Following seven consecutive weeks of declines, the 1-year growth rate increased to a four week high. At 8.75%, the growth rate however remains significantly lower than the 9.44% annualised growth rate during the last two years and the 11.66% during the last five years.

The 39 week annualised growth rate plunged even deeper from last week's collapse and at 4.38% it was the lowest reported for more than five years (15 September 2008). 

Despite the 13 week annualised growth rate hitting a 23 week high at 10.05%, the shorter term growth rates (6 weeks to 1 year) remain considerably lower than the longer-term ones (2 years to 10 years). More specifically, the average of the shorter term growth rates as just defined is currently 6.12%, which is 3.98 percentage points (39.39%) lower than the longer term averages. In addition, all growth rates up to 2-years, except the 13 week, are declining. For example, the 26 week growth rate as of 23 September was 6.42 percentage point lower than it was 26 weeks ago. As the charts below show, all point to a slowing down in the overall growth rate for the Short Version TMS. 

Last week I wrote,
Although the decline in the growth rates are still some way off the dips in 2000 and 2007, followers of the Austrian Business Cycle Theory and investors should pay very close attention to these drops in the growth rates of money supply as they could signal real economic problems ahead (click here for more on this). The collapse in euro area Bank Credit is not making the outlook any better. 
The drop in the growth rates of the money supply combined with high stock market prices and valuation (see here for some links) and the US debt problems could prove a toxic mix for US investors with long positions in not only equity and bonds, but also other assets such as real estate (not to mention other global markets).





Click here for access to previous reports in the Short Version TMS series.